Savings rates: Inflation-beating deals reduce as CPI rise prompts new negative rate fears

Martin Lewis discusses UK regulated savings accounts

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Inflation rose to 0.7 percent in the 12 months to March, up from 0.4 percent in the year to February. Specifically, the ONS detailed the rising price of fuel and clothing pushed prices higher as coronavirus restrictions were eased.

Petrol prices alone were 3.5 percent higher in March 2021 when compared to the same period last year.

The ONS detailed the rise in the price of clothing and footwear was largely down to a ‘fall back in discounting’. Meanwhile, the cost of food including bread, cereals and confectionery fell.

Becky O’Connor, the Head of Pensions and Savings at interactive investor, reflected on these figures and warned savings could be under threat from them: “One of the notable consequences of lockdowns has been the rise in accidental savings.

“The healthy savings pots built up by some, during months of being stuck at home, are now at more risk of erosion from inflation.

“A rise in inflation means that money held in savings accounts with interest rates below the rate of inflation is losing value in real terms.

“For spenders with an appetite for normality, it also means that the things people typically spend money on are becoming more expensive, further eroding their ability to put money aside for the future every month.

“The impact of higher inflation on both people’s ability to save and also on the value of savings creates a kind of vicious circle.

“For those who want to continue to feel the long term benefit of savings they made during lockdown, higher inflation presents a challenge. It may be that for money not needed in the next few years, investing in an ISA or pension could represent a better opportunity to grow your money in real terms than keeping it in cash.”

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These inflation issues were highlighted by additional analysis from, who detailed the number of inflation-beating accounts on the UK savings market has fallen month-on-month due to the rises.

According to Moneyfact’s research, last month there were 326 deals that beat inflation but this has dropped to 90 today.

Additionally, the predicted rate of inflation for the first quarter of 2022 is 2.1 percent and Moneyfact warned there are currently no standard savings accounts that can beat this.

Moneyfacts detailed the following savings and ISA accounts (based on top savings deals at £10,000 gross) are currently the best inflation-beating options available:

  • Easy access account: Virgin Money – 0.50 percent
  • Notice account: Moneycorp Bank – 0.65 percent (90-day)
  • One-year fixed rate bond: Atom Bank – 0.62 percent
  • Two-year fixed rate bond: BLME – 0.80 percent
  • Three-year fixed rate bond: Hodge Bank – 0.95 percent
  • Four-year fixed rate bond: Zopa – 0.94 percent
  • Five-year fixed rate bond: Gatehouse Bank – 1.40 percent
  • Easy access ISA: Yorkshire Building Society – 0.45 percent
  • Notice ISA: The Melton BS – 0.50 percent (60-day)
  • One-year fixed rate ISA: Monmouthshire BS – 0.49 percent
  • Two-year fixed rate ISA: State Bank of India – 0.65 percent
  • Three-year fixed rate ISA: Close Brothers – 0.70 percent
  • Four-year fixed rate ISA: Hodge Bank – 0.65 percent
  • Five-year fixed rate ISA: Shawbrook Bank – 1.10 percent

Rachel Springall, a Finance Expert at, commented on this: “Savers could indeed beat the level of inflation with some accounts today, but it is still expected for the level of inflation to rise beyond the Government’s target of two percent in the coming months. Savers will recognise why their pots’ spending power may be eroded in real terms if this comes to be, as the top savings rates pay far less than two percent, and if they are choosing an easy access account, the best deal today pays 0.50 percent.

“No one could have predicted the significant impact the Coronavirus has had on the economy and the subsequent base rate cuts it incited. In fact, just a year ago inflation was 1.5 percent , 0.5 percent off the Government’s target and there were only 65 deals that could beat it.

“A year ago, savers could get a top rate of 1.20 percent from RCI Bank UK on an easy access account but today savers would need to lock their cash away for five years to get a similar return, with the top five-year fixed bond paying 1.40 percent from Gatehouse Bank.

“Savers will need to think carefully about how they may wish to use their cash in the coming months, and with the easing out of lockdown underway, easy access accounts may remain a firm favourite for quick movement. Those who are more cautious about spending their disposable income may instead be considering their options and, regardless of the savings vehicle, it is vital they keep a close eye on the top deals.”

Additionally, with inflation rising, it created reignited fears of the introduction of negative interest rates as Jason Cozens, the Founder & CEO of Glint, explained: “Suggestions that the inflation could soon hit the Bank of England’s target of two percent should be hugely concerning for consumers as the bank has spent months laying heavy hints that negative interest rates are on the immediate horizon – the cash in our accounts is already losing value by the day due to inflation outstripping the current miniscule interest rates, negative rates would have a catastrophic impact on the value of savings.

“Especially if consumers have to effectively pay banks to store their money.”

“Consumer purchasing power is already negatively impacted by the decline in the real value of our cash as we’ve hit record levels of public borrowing and quantitative easing shows no signs of ending anytime soon.

“All the while the price of goods continues to creep up, tightening the strain on household wallets.”

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