Best savings accounts that beat inflation as millions lose out on good offers

We examine the best savings options for safeguarding your funds against inflation

In January, the UK's inflation rate reached its highest level in ten months, at 3%. According to financial information firm Moneyfacts, this places it higher than the typical easy-access cash savings rate, which is currently 2.85 percent. To put it another way, the typical saver is currently experiencing a real loss.

Fortunately, astute savers can still shop around and find deals that beat inflation. As of February 20, the best one-year fixed-rate accounts pay up to 4.52 percent, while the best easy-access savings accounts pay up to 4.75 percent.

With the end of the tax year drawing near, there are even better offers for those who want to protect their savings income from the tax collector. At present, the top one-year fixed ISA yields 4.46 percent, while the top easy-access cash ISA yields 5.03 percent.

There are currently 1,516 savings accounts that outperform inflation overall, according to the most recent data from Moneyfacts. These accounts include 164 easy-access accounts, 173 notice accounts, 168 variable-rate ISAs, 320 fixed-rate ISAs, and 691 fixed-rate bonds.

Are you utilizing your savings as much as possible?

Following the 2008 financial crisis, we experienced an ultra-low interest rate environment for over ten years. However, in recent years, higher rates have become available again as a result of the Bank of England raising the base rate in an effort to combat inflation.

Nevertheless, millions of savers have been losing out because they have kept most of their savings in current accounts or have neglected to check the rate on their savings account. Current accounts often offer little to no interest.

According to 2024 data released by the Yorkshire Building Society (YBS), there are over 360 billion people in the UK with current and savings accounts that earn 1% or less. Additionally, the building society discovered nearly 13 million current accounts with a balance of more than £5,000. These accounts' average balance was £23,600.

Over 25% of UK adults may have the majority of their savings in a current account, according to separate research from the Building Societies Association that was also released last year.

Now that inflation is increasing once more (and interest rates are currently declining), the problem is getting worse. Economists still anticipate roughly three more base rate cuts before the year ends, despite the Bank of England's indication that inflation could reach 3 percent later this year. With each announcement of a cut, savings rates are likely to fall even more.

"It is important that savers review their current rate and switch if it is not working to its fullest potential because market-leading rates are falling across the board, making it difficult to earn a fair return," stated Caitlyn Eastell, a Moneyfacts spokesperson.

If you transfer a balance of £5,000 from a current account with no or low interest rates to one with a 4 percent savings account, you could earn £200 in interest annually. A 20,000 balance could be transferred to the same account, earning you 800 annually.