Savers are facing a battle as the UK’s rate of inflation continues to be higher than the interest rate offered by almost all savings accounts.
The consumer prices index (CPI) rate of inflation was 2.7 per cent in the year to February 2018, according to the Office for National Statistics.
This means that no available-to-all savings accounts currently pay a level of interest that beats inflation.
How can I make my cash beat inflation?
While there are no open-to-all accounts that beat 2.7 per cent, there are a small number of regular savings accounts which do pay more than inflation. However, all require you to have a current account with the provider.
Consumers with a qualifying current account with First Direct, HSBC, M&S Bank, Nationwide or Santander can access linked regular savings accounts offering 5 per cent interest.
However, these accounts have limits to the amount holders can pay in each month.
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 £250 a month in this account, but you only earn interest while your cash is in the account.
This means your first £250 deposit earns 5 per cent interest for a full 12 months, the second £250 earns it for 11 months and so on.
Other accounts to beat inflation
Current accounts could be a good bet for your savings – especially if you want easy access. However, only two current accounts on the market beat the current rate of inflation. Both also have a minimum monthly pay-ins and other restrictions.
The Nationwide FlexDirect account pays 5 per cent interest on balances up to £2,500 for the first year, but this drops to 1 per cent thereafter. You have to deposit at least £1,000 each month into the account to earn this 5 per cent rate of interest.
Also, the TSB Classic Plus account pays 3 per cent interest on balances up to £1,500. You’ll need to pay in at least £500 a month, register for internet banking, opt-in for online bank statements and paperless correspondence to get this inflation-busting rate.
This article was orignally written by our sister publication Moneywise.
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