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How to fight back when inflation hits our savings

When Covid rocked our world and threatened our financial security, the nation’s savers stepped up.

By April there was more than £1.7trn stashed away in a range of accounts after a year which saw a dramatic increase in the amount households up and down the country were setting aside.

But when the rise in the cost of living hits 2.5 per cent a year and yet your savings are giving you back as little as 0.1 per cent AER, you know something’s off.

Why should that cash be gathering dust in a bog standard account, with its real value being whittled away all the time when you’ve worked so hard to build it?

That’s the reality for millions of savings accounts as the rate of inflation – the measure of the cost of living – continues to rise from its pandemic-induced lull.

And with the Bank of England expecting inflation to hit 3 per cent by the end of the year before levelling off at around 2 per cent next year, it’s increasingly clear that the only way out is to take action ourselves.

Record numbers of savers have turned to ISAs as interest rates on easy access accounts hit a new low, expecting the potential saving on income tax to help make the most of the rates available.

But that might not always be the smartest move, not least because the average ISA rates are currently coming in as low as 0.56 per cent AER, and the amount you can save in any one tax year is limited.

If there was ever a time to start thinking outside the box to help bridge the gap between stubbornly low average savings rates and rising inflation, that time is now.

(Raisin UK)

For starters, it’s worth thinking hard about just how likely it is that you’ll need to access the cash quickly. Lock it away, and the rates of return start rising.

At the time of writing the very best easy access savings accounts on the UK market, including ISAs, were offering 0.50 per cent AER in interest. But set aside your cash for even 12 months and you could see your rewards increase to 0.95 per cent AER with a one-year account accessed through Raisin UK’s free online marketplace of leading banks and building societies.

That’s significantly higher than the best one year ISA rate, currently coming in at 0.61 per cent AER.

It’s the same story with longer fixed rate accounts. The leading two year fixed rate ISA account is only offering 0.85 per cent AER compared with 1.10 per cent AER through Raisin, for example. Fix for five years with Raisin and today’s best deal comes in at 1.25 per cent AER.

See the best fixed term deals at Raisin UK

(Raisin UK)

There are other weapons in the savvy saver’s arsenal too. Most savers still default to their local bank or building society, but limiting yourself to the typical high street provider means missing out on deals on offer elsewhere.

With more banks at your fingertips from across Europe, Raisin UK gives you access to a far greater range of options to help you find the best savings account for your individual circumstances.

But keeping a close eye on your cash doesn’t mean battling your way through a huge number of new websites and endless new login details either. Raisin UK’s simple online platform and app allows you to manage your money easily and at any time with all your accounts under one roof.

And because the banks on our marketplace allow you to deposit a FSCS-protected maximum amount of £85,000 per person, per banking group, you can make more of your money work even harder.

That’s especially true if you take advantage of our£100 welcome bonus, available until the 30th July for new customers.*

Register for free at www.raisin.co.uk and view our ISA-beating rates

* Welcome bonus – Minimum deposit £5,000 (for easy access accounts, lowest balance must remain above £5,000 for the first six months). Term or duration of your account must be six months or more. Raisin UK is a trading name of Raisin Platforms Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 813894). Raisin Platforms Limited is registered in England and Wales, No 11075085. Registered office: c/o Withers LLP, Third Floor, 20 Old Bailey, London, United Kingdom, EC4M 7AN. The information on this page does not constitute financial advice, always do your own research to ensure it’s right for your specific circumstances. Tax treatment depends on the individual circumstances of each customer and may be subject to change in the future.

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