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Just three cash ISAs now beat inflation

Inflation has remained at 2.7% but savers are still struggling to get a return.


by Michelle McGagh on Jan 15, 2013 at 11:14

Just three cash ISAs now beat inflation

Inflation may have remained at 2.7% last month but savers still have scant choice when it comes to choosing an account, with just three individual savings accounts (ISAs) beating inflation.

The Office for National Statistics announced today that the consumer price index (CPI) has remained at 2.7%. Although the good news is that it has not increased further, there is bad news for savers who are struggling to make their savings beat inflation.

To beat inflation a basic rate taxpayer, who pays 20% income tax, needs to find a savings account paying 3.37% and a 40% higher-rate income taxpayer needs to find an account paying at least 4.5%.

There are 844 standard savings and ISA accounts on the market but just three ISAs negate the impact of tax and inflation regardless of your tax position. There are no instant access, one-year bond or notice accounts on the market that beat inflation.

Coventry Building Society’s 60 Day Notice ISA is still paying the best rate of 3.1%. The Advantage Cash ISA from M&S Bank is paying 2.75% and Earl Shilton Building Society comes in third with its 90 Day Cash ISA paying 2.7%.

As ISA returns accumulate tax free the rate only needs to be 2.7% or more to beat inflation, regardless of your income tax bracket.

The impact of inflation should not be underestimated; £10,000 invested five years ago by a 20% taxpayer would now have the spending power of just £9,016.

Sylvia Waycot, finance expert at, said 2013 looked to be a ‘dreadful year for savers’ and there would be little hope for change.

‘Providers are not even pretending to offer competitive rates and with no real interest to be earned, inflation is really going to bite the weary saver,’ she said.

‘Today’s inflation news means that once again our money won’t buy us as much as we expect it to.’

Waycot said savers were being hit by a double whammy of high inflation and the introduction of the Funding for Lending scheme, which has made £80 billion available to banks and building societies to loan out as mortgages. Access to this money means banks and building societies no longer have to try and entice savers, whose money they have historically used to loan out.

‘Since August last year, when the government launched its Funding for Lending scheme, the savings market has become unrecognisable; products have been withdrawn, those that remain have had the rates cut and bonuses are fast becoming a thing of the past. Throw inflation into the mix and it spells intense misery,’ said Waycot.

‘All ages of society are affected by this, from the young trying to save deposits for first homes, to the elderly who are reliant on savings as an additional stream of income to supplement their pension.’

11 comments so far. Why not have your say?


Jan 15, 2013 at 16:19

But RPI is 3.1% !!!

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Anonymous 1 needed this 'off the record'

Jan 15, 2013 at 18:11

And REAL inflation is higher than both!

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Tony Peterson

Jan 15, 2013 at 18:21

No cash product matches the ongoing REAL inflation loss in the value of cash.

Happily, there are other ways of enjoying inflation busting income.

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Alasdair Lawrance

Jan 20, 2013 at 08:42

A quick look at the Coventry website shows their best rate as 2.8%, including a 0.6% 'bonus' . And you can't transfer in. So, as per usual, heads I win, tails you lose.

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Jan 20, 2013 at 10:13

quite right harmoney100.

both cpi and rpi have delivered 3.2% compound from 31 dec 2007 to 31 dec 2012.

the £9,016 number used in this article is woefully innaccurate ane implies that all numbers relying on the arithmetical accuracy of numbers used by the author (and its editor) lack credibility.

here is a link to the relevant ONS page

use the top line and tables 5a/b/c for CPI and table 20 for RPI

the actual purchasing power of £10,000 in dec 2007 is

£8,496 using CPI


£8,545 using RPI

making this period one of the few five year periods were CPI is actually HIGHER than CPI

either number is a long way from the £9,016 referred to.

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Rodney Clarke

Jan 20, 2013 at 15:14

According to Coventry dropped their rate yesterday.

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Jan 20, 2013 at 21:29

Billions of pounds to be transferred plus invested in cash isa's in the next couple months leading up to 5th April ,the way things are going there will not be any isa's that beet inflation by then.

its a nightmare for retires who have invested most of there hard earned money

in cash isa over the years ,planning for a bit of extra money in there retirement

and do not wan't to start taking chances with there money/to old.

whats the answer? there seems to be better interest offers for opening a new isa than transferring one so. one option is.

If you have a cash isa that needs transferring before April 2013 and you have not used your 2012/13 cash isa allowance up and its only around £5640

when it matures ,there nothing stopping you from cashing it in,and using

the money to reinvest in a new cash isa with better rates,before April 4th 2013, or after if your not thinking of opening a cash isa in 2013/14

op.2 Transfer the cash isa into a instant access isa and transfer again when a better deal comes along. its better than .5% with the old provider.

You can transfer cash isa 's as many times as you like, its easy .

ref. isa transfers, there is no loss of interest now,as soon as the provider

that you are transferring from stops paying interest, the one you are transferring to has to start paying interest, takes up to 15 days or less.

good luck.

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Jan 21, 2013 at 09:51

re Tony Peterson

Tony, what other ways do you suggest could beat inflation ?

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Tony Peterson

Jan 21, 2013 at 10:01


High yielding defensive equities. Take profits up to CGT allowance annually.

Invest dividends in other high yielding defensive equities. I'm up over 5% above inflation in the first three weeks of this year.

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Jan 21, 2013 at 15:08

re Tony

Thanks for that Tony.

Would you trust a High Income Fund manager to acheive that ?,

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Tony Peterson

Jan 21, 2013 at 15:18



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