Citywire for Financial Professionals
Share this page:
Stay connected:

Citywire printed articles sponsored by:

View the article online at

How to get your savings to beat inflation

There aren't many inflation-beating savings options around, and consumers need to act quickly before they disappear.


by Michelle McGagh on Nov 19, 2012 at 15:44

How to get your savings to beat inflation

A hike in inflation means savers are being hammered once again as interest rates fail to keep pace, but there are ways to eke out a bit more from your savings or at least stop them being eaten away.

Last week the Bank of England announced inflation, as measured by CPI, has increased to 2.7% from 2.2% - exactly the opposite of where the Bank wants to go as it has a target of 2% for inflation.

It has already been tough for savers to get any respectable return on their investments and the increase in inflation is going to make it even tougher. To outrun inflation a basic rate taxpayer needs to earn 3.37% a year on their savings and a higher rate taxpayer 4.5%, according to price comparison website

Of the thousands of savings accounts available just 40 standard accounts and ISAs are paying above inflation for basic rate taxpayers, and higher rate taxpayers do not have any access to non-ISA savings that will beat inflation.

Negating the impact of inflation is an important part of saving, which is why it’s not a good idea to stuff your money under the mattress. If you had invested £10,000 five years ago and been taxed at 20% but been paid average interest, your money would have the spending power of just £8,899 today – not a pretty picture.

Where should I put my money?

The truth is that if you want to beat inflation, you need to be prepared to lock your money away and the longer you lock it away for the better.

United Trust Bank is offering 3.35% on its five-year Fixed Cash ISA, for transfers into the product only. The Halifax ISA Saver Fixed – five year bond – is offering 3.2% and if you want to lock your money away for slightly less time, Halifax offers a four year option paying 3.1%.

If you don’t want to or can’t afford to tie your money up for a longer amount of time Coventry Building Society has a 60 day notice ISA paying 3.25% and Cheshire Direct Building Society is paying 3% on its Direct Cash ISA (issue four), which includes a 2% bonus until 31 January 2014.

Charlotte Nelson, finance expert for, said: ‘After a brief spell of falling inflation, savers now have to face up to the reality of it rising yet again.

‘Savings rates are continuing to fall, so investors face a real struggle to generate any sort of real return…This time last year to obtain a rate of 3.1% you could choose an easy access account but now if you were looking for a similar return you would have to tie your money down for up to four years.’

4 comments so far. Why not have your say?


Nov 19, 2012 at 23:50

Frankly, the conclusion is rubbish. Perhaps the author is being paid by the banks - Ha Ha!! At some point over the next 1-2 years, this QE and cheap foney money thing is going to crash into the cliff of logic. Then you watch interest rates. The truth is that if 100,000 of us pulled our money out of the banks into £20 notes and "stuffed it under the matress", the rate would rocket. and if more and more of us did it, the financial markets including the BoE would collapse into a pile of ..... Let's do it.

report this


Nov 20, 2012 at 12:28

It does seem extraordinary that on a financial advisory website, the best they can come up with to counter the anticipated rise in inflation is to lock cash away for 5 years at 3-point-something% fixed!

report this


Nov 20, 2012 at 14:41

The problem with many of the advice pages on Citywire is that they seem to be written in a hurry and with little thought and only serve to maintain the fallacies.

Inflation is a backward looking figure (what has happened to the value of money in the last twelve months). It says nothing about what will happen in the future.

If the article was entitled "the best interest rates at the moment" and the author expressed a view about whether short, medium and long term inflation was likely to be higher or lower than this, it might be interesting. Otherwise it has no value.

report this

Alasdair Lawrance

Dec 30, 2012 at 08:53

You merely have to look at the gap between rates for savers and rates for borrowers to see how the institutions are manipulating/controlling the situation.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

Sponsored By:

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add to your safe senders list so we don't get junked.

Latest from Investment Basics

See all headlines

Sorry, this link is not
quite ready yet