Inflation is eating into 99% of standard saving accounts

19 September 2018

Savers are still being left at the mercy of inflation eroding their hard-earned cash, despite a boom in the number of rate rises in the market. Today, less than 1% of the standard savings market can beat a return of 2.70%, meaning that 99% of the standard savings account market* is being eroded by inflation. 

Savings rate increases have outweighed cuts for 19 consecutive months, with Moneyfacts.co.uk recording 219 rate rises in August compared with just 28 cuts. Furthermore, statistics released today show the Consumer Prices Index (CPI) rose to 2.7% during August, meaning there are only 4 fixed rate bonds (based on a £10,000 deposit) that can match or beat inflation*. Within that, there are just 2 fixed bonds that beat 2.70%, which represents less than a 1% share of the standard savings market.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Inflation is continuing its assault on savers’ cash, as less than 1% of standard savings accounts available can beat 2.70% today, all of which will lock funds in for the longer term. Its impact has likely hit savers for many months, as the average rate of inflation over the last 12 months has been 2.5%. 

“Whether inflation is set to rise for the remainder of the year is uncertain, and its future is misty due to economic uncertainties. There are also murmurings of another base rate rise before the year is out, but whether this will in turn feed the savings market and result in many more deals beating the level of inflation is highly unlikely. Today, a staggering 85% of the standard savings market pays less than 2% (based on a £10,000 deposit).

 
“Despite the most recent base rate rise, the average increase on easy access and notice accounts was a measly 0.16% in August, and many savers were left waiting to hear this news until the start of this month. There are still providers yet to announce their plans and worse still, there are those that have failed to increase their rates by the full 0.25%. 

“It is going to be a struggle to find a savings account that provides an inflation-beating return without locking money away for the longer term. Therefore, savers who want quick access to their cash would be wise to consider alternatives such as high interest current accounts, but they should be mindful that these typically only pay high interest on small balances and have eligibility criteria that must be met. 

“If savers have their cash languishing in an account paying a poor return, they should be proactive and switch. Some of the best deals around are from more unfamiliar brands or are only available online. Therefore, savers should prepare to change their savings habit, especially if they favour high street branches.” 

*Data note: Please note that these savings product numbers only include deals that are available to all UK residents (this figure does not count each interest payment option for each account) based on a £10,000 deposit. Our daily Moneyfacts savings rate monitoring started in July 2015 and is a record of live standard savings account changes, which includes fixed rate bonds of all terms, all ISAs, notice accounts and no notice accounts.