Nearly 250 savings accounts now beat inflation – but you’ll have to ditch the big banks to take advantage

  • January’s CPI fell to 1.8% – down from 2.1% in December 
  • Fall means more than double the number of accounts now beat inflation
  • Best one-year fixed-rate now beats the CPI by 0.37 percentage points 
  • High street banks and Isas aren’t keeping up with savings rate boosts

George Nixon For Thisismoney.co.uk

Nearly 250 savings accounts now match or beat inflation following January’s fall in the Consumer Prices Index.

It’s good news for savers who have suffered in recent years with rates that don’t keep up with inflation.

Official figures today show the CPI fell from 2.1 per cent to 1.8 per cent last month, dragging the rate below the Bank of England target for the first time in two years.

Last month, 106 accounts matched or beat the CPI but that has more than doubled to 245 after the drop.

Boost: Savers have been boosted by today's fall in the CPI - it means more accounts now beat inflation

Boost: Savers have been boosted by today's fall in the CPI - it means more accounts now beat inflation

Boost: Savers have been boosted by today’s fall in the CPI – it means more accounts now beat inflation

The best one-year fixed-rate account, offered by Sharia bank Al Rayan, pays 2.17 per cent, beating inflation by 0.37 percentage points. 

Before last month, the last time a one-year fixed-rate matched inflation was November 2016, and back then the CPI was only 1.2 per cent.

Al-Rayan is Sharia compliant, which means it does not pay interest but quotes an expected profit rate, which in practice functions the same way.

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It can be opened with £1,000 and it is Financial Services Compensation Scheme protected – meaning savers have a £85,000 safety net, or £170,000 for couples.

Other one-year fixed-rate accounts in This is Money’s best buy tables that beat inflation include OakNorth’s, which pays 2.1 per cent, while offers from Aldermore Bank, Tandem Bank, Investec Bank and Masthaven Bank all pay two per cent. 

The top two year fix from Gatehouse Bank pays 2.35 per cent, now some 0.55 percentage points above inflation.

Meanwhile, the top five year fix offers 2.68 per cent from the same bank, or currently, 0.88 percentage points beyond the CPI measure. 

245 savings accounts now match or beat the CPI - more than double last month

245 savings accounts now match or beat the CPI - more than double last month

245 savings accounts now match or beat the CPI – more than double last month

Seven notice accounts also now beat the CPI, led by Charter Savings Bank’s 95 Day Notice Issue 21 account, which pays 0.1 percentage points above inflation.

However, offers from high street banks and rates on easy-access and cash Isas still lag. 

The best one-year cash Isa, offered by Shawbrook Bank, pays 1.74 per cent, meaning locking your money away for a year would still net you a return 0.06 percentage points lower than the CPI.

Sarah Coles, personal finance analyst at Hargreaves Lansdown said: ‘If you’re sitting in the vast majority of savings accounts and Isas from the big high street banks, you’re still likely to be making rock-bottom returns.’

Tom Adams, head of research at advice site Savings Champion, said: ‘Having come tantalisingly close in December, CPI inflation has finally fallen below the Bank of England’s two per cent target and is now at its lowest level for two years.

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‘On the face of it, today’s news is great for active savers, with the number of accounts to choose from that match or beat the rate leaping up as a result.

‘That said, sadly it is still the case that many savings accounts are paying less than inflation – particularly older accounts and those held with the high street banks.

‘But savers do not have to accept paltry rates – switching to at least mitigate the effect of inflation is far better than leaving the funds earning a pittance and by switching to the best possible rates, they are reducing the effect of inflation on their cash.’ 

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