Nine savings accounts that are beating inflation

The consumer prices index (CPI) rate of inflation was 2.6 per cent in the year to July, according to the latest figures from the Office for National Statistics.

This means that no available-to-all savings accounts currently pay a level of interest that beats or matches the rate of inflation.

There are fears that inflation could rise even further, so there could be further struggles for savers ahead.

- How to inflation-proof your portfolio

How can I make my cash beat inflation?

Only one account currently matches the rate of inflation, and that requires you to lock your cash away for seven years. The PCF Bank Seven Year Term Deposit pays 2.6 per cent to savers and can be opened by post or online. You must have at least £1,000 to open this account.

There are a small number of regular savings accounts which do pay more than inflation – but all require you to have a current account with the provider.

- Savings rates are on the rise: here are the top paying accounts

Consumers with a First Direct current account, HSBC Advance or Premier account, M&S Bank current account, Nationwide Flex account or Santander 123 account can access linked regular savings accounts offering 5% interest.

Lloyds Bank’s Club Lloyds account holders can also access a 3 per cent regular saver with their bank. However, these accounts have limits to the amount holders can pay in each month.

Regular saver providerInterest rate (%)Savings limits (per month)
First direct5£25-£300
M&S Bank5£25-250
Lloyds Bank3£25-400

Remember these accounts are regular savers – designed for you to drip feed cash into over the course of a year.

Let’s use Nationwide’s 5 per cent regular saver as an example. You can save £500 a month in this account, but you only earn interest while your cash is in the account.

This means your first £500 deposit earns 5% interest for a full 12 months, the second £500 earns it for 11 months and so on. At the end of the year you’ll have earned £161.

Current accounts could be a better bet for your savings – especially if you want easy access. The Nationwide FlexDirect account pays 5% interest on balances up to £2,500 for the first year, but this drops to 1% thereafter.

Tesco Bank offers 3 per cent on balances up to £3,000 while TSB also pays 3 per cent interest on its Classic Plus current account, but only on balances up to £1,500. Remember that you have to meet certain requirements, such as minimum pay-ins, to get these rates.

- This article first appeared on our sister website Moneywise

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