The best inflation-beating savings accounts

Take advantage of the record low rate by stashing some cash in an inflation-busting savings account

Updated: 
The best inflation-beating savings accounts

The latest Consumer Price Index (CPI) figures show that inflation has fallen to just 0.5%, down from 1% in November.

A large drop in oil and food prices is said to be a catalyst for the fall.

This is good news for savers, as finding a home for your money that offers an inflation-beating return just got a lot easier. A total of 510 savings accounts now beat inflation.

To beat inflation, a basic rate taxpayer would need an account that pays 0.63% a year, while higher-rate taxpayers would need a minimum of 0.83%.

But don't settle for that. Here are the accounts that offer far better returns.

Easy access savings

If you want to start saving, but feel like you might need to dip into your account now and again, then your best bet is an easy access savings account.
AccountInterest rate (gross AER)Minimum depositWithdrawal limitsBonus
Kent Reliance Branch Easy Access Savings 1.5%£1,000NoneN/A
The West Brom Limited Access Saver1.4%£1Up to six withdrawals a yearN/A
ICICI HiSAVE SuperSaver Savings Online Account 1.4%£1NoneN/A
Earl Shilton BS Progress1.4%£100Six withdrawals a yearBonus of 1.30% applies if certain conditions are met
Coventry BS PostSave Easy Access1.4%£50012 withdrawals a yearN/A
Post Office Online Saver1.4%£1None0.75% for 12 months


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Fixed rate savings bonds

For greater returns, you could look at a fixed rate savings bond. As your money is locked away, you'll get more back.

One year
AccountInterest rate (AER)Minimum depositAccess
NS&I 65+ Guaranteed Growth Bond*2.8%£500Online, post, telephone
Al Rayan Bank** Fixed Term Deposit1.9%£1,000Online, post, telephone, in-branch
ICICI Bank HiSAVE Fixed Rate Account1.85%£1,000Online
State Bank of India Fixed Deposit1.80%£10,000Branch, online

*Only available to savers over 65

**Formerly Islamic Bank of Britain, anticipated profit rate

18 months
AccountInterest rate (AER)Minimum depositAccess
Al Rayan Bank 18 Month Fixed Term Deposit*2%£1,000Online, post, in-branch
Harrods Bank 18 Month Fixed Rate Deposit Account1.95%£20,000Post, in-branch
FirstSave Fixed Rate Bond1.90%£1,000Online
Hampshire Trust Bank 18 Month Bond1.90%£1,000Post
Bank of Cyprus UK 18 Month Fixed Rate Bond**1.85%£1,000Online, post, telephone, in-branch

*Anticipated profit rate

**Must be an existing customer

Two years
AccountInterest rate (AER)Minimum depositAccess
Al Rayan Bank Fixed Term Deposit*2.32%£1,000Online, post, telephone, in-branch
State Bank of India Fixed Deposit2.25%£10,000Post, in-branch
Harrods Bank 2 Year Fixed Rate Deposit2.25%£20,000Post, in-branch
Close Brothers Savings Select Gold Fixed Term Deposit2.15%£10,000Post
Paragon Bank Two Year Fixed Rate2.1%£1,000Online

*Anticipated profit rate

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Three years
AccountInterest rate (AER)Minimum depositAccess
NS&I 65+ Guaranteed Growth Bond*4%£500Online, post, telephone
Secure Trust Bank Fixed Rate Bond 3 Year Term 2.51%£1,000Post, telephone
State Bank of India Fixed Deposit2.50%£10,000Branch, post
Harrods Bank Fixed Rate Deposit2.50%£20,000Branch, post
Vanquis Bank High Yield2.41%£1,000Online

*Only available to savers over 65

Five years
AccountInterest rate (AER)Minimum depositAccess
Secure Trust Bank Fixed Rate Bond 5 Year Term 3.03%£1,000Post, telephone
Vanquis Bank High Yield3.02%£1,000Online
UBL Fixed Term Deposit3.01%£2,000Online, branch, post
Yorkshire Bank Retail Term Deposits3%£2,000Online, branch, post, phone
Clydesdale Bank Retail Term Deposits3%£2,000Online, branch, post, phone

Or if you're happy to go the whole hog, you can opt for the Secure Trust Bank Fixed Rate Bond 7 Year Term. You'll get 3.25% interest with a minimum £1,000 deposit.

Cash ISAs

Cash ISAs offer a tax-free return on your savings. Here are the top rates on offer, across a range of terms, all of which handily beat inflation.
ISATermInterest rate (AER)Minimum deposit
NS&I Direct ISAInstant access1.50%£1
Virgin Money Fixed Rate Cash E-ISAOne year1.70%£1
Post Office Fixed Rate Cash ISATwo years1.95%£500
Coventry BS Fixed Rate ISAThree years2.25%£1
Virgin Money Fixed Rate Cash E-ISAFive years2.50%£1

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Why current accounts are better

It's worth remembering that current accounts still offer better rates than savings deals.

For example, the Nationwide FlexDirect account offers you 5% on balances of up to £2,500 for the first 12 months. It also has fee-free overdrafts for that period. However, this will drop to a measly 1% after the first year. If you want a consistently high rate for a smaller savings pot, the TSB Classic Plus account might be the deal for you. it pays 5% on balances up to £2,000, and that rate won't drop off after a year.

For bigger balances, the Santander 123 current account pays 3% if you have a balance of between £3,000 and £20,000. It also pays cashback on your direct debits, though there is a £2 monthly fee to consider.

Compare current accounts

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