Saturday, December 7, 2024

Best savings accounts that offer above-inflation rates, 29 November

Must read

UK households are always looking for ways to make their money go further amid the cost of living crisis and savings accounts can help.

After years of low rates, high-yield savings accounts are having a moment even as the Bank of England (BoE) cut interest rates to 4.75%. While homeowners face high mortgages, there is a silver lining in higher borrowing costs and consumers can find UK savings accounts offering higher than inflation rates.

UK inflation accelerated to 2.3% in October, according to data from the Office for National Statistics (ONS), as surging household energy bills added upward pressure on prices. This marks an increase from September’s 1.7% rate, pushing the consumer prices index (CPI) back above the Bank of England’s 2% target.

Savers should shop around to find the best deals and check what rate they are on — as they could still be sitting on a product that does not beat inflation. Providers have already started to lower rates as interest rates fall, so consumers need to check if their money is well-placed for higher returns.

Read more: UK mortgage approvals at highest level in two years

Alice Haine, personal finance expert at Bestinvest, said: “Locking in the best savings deal possible, while rates remain higher, is the best inflation-beating strategy, particularly for those with cash languishing in an account delivering dismal returns.

“For those with sizeable sums in a savings account, that puts them at risk of paying tax on the interest they earn, a more tax-efficient strategy that takes advantage of the benefits that come with individual savings accounts (ISAs) and pensions is key at a time when frozen or cut personal tax thresholds are dragging increasing numbers of people into paying higher rates of tax as their pay increases.”

The main factor you should be aware of when choosing a savings account is the difference between easy-access and fixed-term.

Easy-access accounts allow you to access your money when you need it. Fixed-term means you can’t access your cash for the duration of the deal. They usually offer better rates, but you must be comfortable with not touching your savings for a long period, usually between one and five years.

The best fixed-rate account offers 4.9% for three months and is available from Sainsbury’s Bank via the Proper platform. You need at least £20,000 to open the account and you can invest up to £250,000.

There is a 4.85% deal is available from Cynergy Bank. This fixed-term personal savings account requires a minimum of £1,000 to be locked for six months. You can invest up to £1,000,000. Interest will be paid at maturity, meaning at the end of the six months.

Latest article