Is it time to look into switching to a different savings account?

Savvy savers who wish to outpace inflation now have the option of selecting from more than 375 savings and cash Isa accounts that either match or exceed the rate of the CPI. In comparison, only 172 accounts were able to keep up with or get ahead of inflation during the previous month. The annual rate of inflation dropped from 2.1 percent in December 2018 to 1.8 percent in January, which is beneficial to savers, in addition to the gradual increase in savings and Isa rates that has been occurring. In this article, we will discuss which bank accounts are able to outpace inflation and will list the best deals available in each category.

 

Accounts for savings with the highest rates

It utilised data from Moneyfacts to conduct an analysis on over 1,600 different accounts. We were able to locate 202 fixed-rate savings accounts that offered annual percentage yields (AER) of at least 1.8 percent, and opening one of these accounts does not need a commitment of at least five years. We have eliminated all accounts that are essentially the same but have slightly different terms, which means that the minimum initial investment required for every account is no more than $5,000. In addition, we have eliminated any accounts that are duplicates of other accounts.

Best accounts for savings with a limited time horizon

It is not required to lock away your money for five years in order to beat inflation; just one year will do the trick. This is something that is likely to come as a surprise to people who save money. There are 23 one-year savings accounts that offer a rate that is comparable to or higher than the 1.8% rate, but the best ones are as follows: Al Rayan Bank a deposit with a set period of one year and an expected profit rate of 2.17 percent (EPR) Premier Deposit Account with a term of one year and an annual percentage yield of 2.05% from Bank of London & The Middle East. Fixed-term deposit with the QIB for one year (Raisin issuance), paying 2.05 percent EPR A minimum initial deposit of one thousand pounds is required for each of the three accounts.

The best accounts for long-term savings

 

When you invest your money for a longer period of time, you will often receive a higher rate of interest on that money. The following are the best rates currently offered on savings accounts with a fixed term: Premier Deposit Account with a term of seven years and an annual percentage yield (EPR) of 2.75 percent from Bank of London & The Middle East Premier Deposit Account with a five-year term and an EPR of 2.7 percent from Bank of London & The Middle East Deposit at Gatehouse Bank with a set period of five years and an EPR of 2.68 percent To reiterate, the initial deposit for each account must be at least one thousand dollars.

Isas for cash that are more than the CPI

The number of cash Isas that keep up with or exceed inflation has increased to 46, up from just nine accounts one month ago. Even fixed rates for a shorter period of time will generate returns that are above inflation.

There are six different two-year fixed-rate cash Isas that are higher than 1.8 percent.

The three most expensive rates are as follows: 1.91 percent annual equivalent rate on Shawbrook Bank’s two-year fixed-rate cash Isa bond Fixed-rate cash Isa from Charter Savings Bank for two years, 1.87 percent annualised earnings rate (AER) The advertised annual percentage yield (AER) on the two-year fixed-rate cash Isa from Cynergy Bank is 1.82 percent. Keep in mind that the first deposit requirement for a Shawbrook Bank account is £5,000, whereas the initial deposit minimum for an account at Charter Savings Bank is specified as £1,000, and the initial deposit minimum for an account at Cynergy Bank is specified as £500. However, if you are willing to commit to a fixed time that is longer than average, you can find interest rates that are much higher.

The following are the three cash Isas that offer the best rates for longer-term savings:

Fixed-rate cash Isa from Charter Savings Bank for a period of five years, at a rate of 2.26 percent AER Fixed-rate cash Isa over five years with Shawbrook Bank, 2.13 percent annual equivalent rate Fixed-rate Isa from Newcastle Building Society with a five-year term and a 2.1 percent annual equivalent yield To reiterate, Shawbrook Bank requires that you have at least £5,000 in savings, Charter Savings Bank requires that you have at least £1,000 in savings, and Newcastle Building Society wants that you have at least £500 in savings.

Tax advantages for Cash Isa accounts

 

Your gains will continue to be exempt from taxes and will not count toward your personal savings allowance, despite the fact that cash Isa rates are still lower than the highest-rate savings accounts. Your annual Isa allowance, which cannot exceed £20,000, will limit the amount of money you can put into an Isa during any given tax year. You have the option of putting the entire amount into a cash, stocks and shares, or innovative finance Isa; alternatively, you can divide it up and put it into a number of different Isas.

Regular saves that result in returns

In addition to the information provided by Moneyfacts, our team researched and found 32 traditional savings accounts that provide an interest rate that is more than the rate of inflation. However, many of them come with extremely particular conditions and demand that deposits be paid every month; therefore, you should ensure that you are able to make a commitment before opening one.

The best rates are as follows: First Direct regular saver account, 5% annual equivalent rate (AER); M&S Bank monthly saver, 5% AER; HSBC regular saver – preferential rate, 5% AER Each of these accounts requires a minimum monthly payment of twenty-five pounds sterling. You are limited to making monthly deposits of no more than £300 with First Direct, and no more than £250 with M&S Bank and HSBC. Before you may qualify for the regular savers deals, each service provider will want you to have other accounts with them first. The AER offered by First Direct is only good for a period of one year; after that, it will drop to 0.15 percent AER; therefore, you should be sure to move banks once that period of time has passed.

 

In order to qualify for the 5% interest rate that is offered on the M&S Bank account, the account must be kept active for a minimum of one full calendar year. If you close the account before it has served its purpose, any savings you have placed will only receive an annual percentage yield of 0.2 percent. If you want to take advantage of HSBC’s preferred rate, you will need to open either an HSBC Premier or an HSBC Advance account. Both of these accounts need a rather sizeable monthly minimum deposit to be made into them. If you close the normal saver account within the first year of having it, you will see the rate drop to 0.2 percent AER.

Junior cash of the highest calibre Isas

The maximum amount that can be saved in a Junior Individual Savings Account during the 2018–19 tax year is £4,260; this amount will increase to £4,368 during the 2019–20 tax year. There are thirty-six different junior cash Isas that offer returns that are comparable to or higher than the rate of inflation. The three most impressive accounts are as follows:

Junior cash Isa from the Coventry Building Society, paying 3.6 percent AER Junior cash Isa account with Danske Bank, 3.45% interest rate AER 3.25 percent annual equivalent yield (AER) on the Darlington Building Society Junior cash Isa Two of these accounts have access requirements that depend on where you live. For example, you can only open a Danske Bank account in person at one of their Northern Ireland branches. In the meanwhile, users of Darlington Building Society can only create an account if they live in one of a select number of postcodes.

Profit from the Help to Buy Isa programme

Help to Buy Isas are savings accounts that assist first-time buyers in putting money down for a house, and once the purchase is finalised, the government provides an additional bonus of 25 percent to improve the buyer’s cash position. There are 25 different Help to Buy Isas that offer returns that are more than the rate of inflation. The following are the top three rates: Help to Buy ISA from Penrith Building Society, paying 3% annual equivalent yield Building society of Tipton and Coseley (Tipton & Coseley). AER of 2.95 percent for the Help to Buy ISA Help to Buy ISA from Vernon Building Society, 2.85 percent annual equivalent rate Check the eligibility requirements first before submitting an application because all of the accounts with the best rates are restricted to local residents exclusively. The Barclays Help to Buy Isa offers the highest rate offered elsewhere in the country, at 2.58 percent annual equivalent rate (AER), which is still considerably above inflation.

Accounts for young people’s savings that outperform inflation

There are 27 savings accounts for children that either match or exceed the rate of inflation. The accounts that pay the most are the Nationwide Future Saver (for current clients), which offers an AER of 3.5 percent. Melton Building Society of Mowbray, Inc. The Brave Ones Young Savers 30-day notice, 3.04 percent annualised effective rate AER of 2.5 percent with the Nationwide Future Saver. Even though the Nationwide account is marketed as having ‘instant-access,’ the annual percentage yield (AER) will drop to 0.5 percent if you make more than one withdrawal per year. If you limit yourself to one withdrawal per year, you will earn the rate that is stated. Additionally, we discovered three conventional savings accounts for children that offered quite attractive interest rates:

 

AER of 4.5 percent is offered on the Halifax Kids’ Monthly Saver (for ages 0 to 15 years). A Building Society Made of Saffron Children’s Regular Saver (birth to 15 years old), 4% Annual Equivalent Rate AER of 3.5 percent is offered by the Barclays Children’s Regular Saver (for ages 0 to 17 years). The Halifax account mandates a monthly contribution of between £10 and £100, and no withdrawals are permitted from the account. You are required to make a payment of between £5 and £100 each month into your Barclays and Saffron Building Society accounts. In every month in which a withdrawal is processed, the AER will be lowered to 1.51 percent by Barclays.

Why is it critical that savings rates remain higher than the rate of inflation?

The Consumer Price Index (CPI) is a measure of inflation that measures the prices of an imaginary shopping basket that contains around 700 common products and services. This includes everything from aeroplane tickets, gas, and rail tickets to groceries, alcoholic beverages, and even workout clothes. The rate of inflation is calculated by comparing the current prices to those that existed at the same period the year before and taking the absolute value of the price difference.

If you leave cash in a savings account during that year and it does not earn interest at the same rate or more, then that cash will essentially be worth less than it was a year ago because it will not be able to buy as many of those goods and services. This is because the rate of inflation has increased.