180 accounts that beat inflation
SAVERS today have a choice of 180 accounts that can match or beat inflation, compared with two years ago when there were just 19.
Interest rates have risen in that time, while inflation has bobbed around the same level.
This means that savers only need to lock away their money for a year to protect it from the ravages of inflation.
It is crucial for savers to earn a rate which at least matches, or betters, that of the annual cost of living rise, to ensure their nest egg’s spending power is not eroded.
The Consumer Prices Index measure of inflation stood at 1.9 pc in February, latest official figures show. It is slightly up from the 1.8 pc in January but still below the target limit of 2 pc set by the Bank of England.
Despite the slight rise, research from data monitors Moneyfacts unearthed the 180 accounts where savers can match or outpace inflation.
These include 152 fixed-rate bonds, 27 fixedrate cash Isas and a notice account.
Now the top rate on a one-year fixed-rate bond is 1.97 pc, just ahead of the inflation rate. Two years ago, when there were just 19 accounts of this type, the best you could do was 1.5 pc, 0.3 percentage points below the rise in the cost of living.
To get the best rates, savers need to look to newer banks, which mainly operate online.
The top deal one-year fixed-rate bonds are available with Shawbrook Bank (1.97 pc), Close Brothers Savings ( 1.96 pc) and OakNorth Bank (1.91 pc).
If you are willing to tie your money up for two years PCF Bank pays 2.26 pc, while Aldermore, Close Brothers and Tandem banks offer 2.25 pc.
By comparison, major High Street banks pay pitiful rates.
HSBC, for example, has a one-year deal at just 0.7 pc, while Santander offers 0.5 pc. On two-year deals, Halifax pays just 0.7 pc and Lloyds 0.65 pc. With a rate of 0.7 pc and inflation running at 1.9 pc, savers would see the purchasing power of their money fall by 1.2 pc a year.
It means for every £1,000 invested, you will lose £12 in value each year — even after your interest has been added.
If you want to stick to the High Street, you won’t match inflation unless you tie your money up for two years or more.
However, Kent Reliance pays an inflationbusting 2 pc on its fixed- rate two- year bond, which is available through its branch network, which is limited.
For one-year you can earn 1.85 pc with Kent Reliance, 1.55 pc with Yorkshire BS and Cambridge BS, or 1.45 pc with Leeds BS.
If you are happy to run your account over the phone, National Savings & Investments pays 1.5 pc for one year.
Savers wanting to keep money in an easyaccess account are still losing out. Top rate is 1.5 pc from Kent Reliance and from Marcus at Goldman Sachs, (includes first-year bonus).