Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, said:

“Savers may be feeling the squeeze as inflation is back on the rise, which means they will have to pay much closer attention to the rate their money is earning, as accounts paying below inflation will see the true value of their cash eroded. However, the good news is that savers are not short of options, with around four in five savings accounts currently paying above inflation. For savers, beating inflation is the difference between simply earning interest and increasing the spending power of their money. While a balance can be growing on paper, it could be shrinking in value if the savings rate fails to keep pace with rising prices.

“For someone with £10,000 in savings, the difference of a competitive rate is stark. In the top easy access account, savers could still be £210 better off once inflation is accounted for. On an average savings account, the real gain falls dramatically to just to £73, but even this is preferable to an account paying 2%, which would leave the saver around £90 worse off in real terms. 

“Those with larger savings pots also need to think beyond the headline rate. A higher-rate taxpayer can use up their £500 Personal Savings Allowance with just £10,000 earning 5%, meaning any further interest could become taxable. Despite their slightly lower rates, this is where ISAs could become particularly valuable. While a top easy-access ISA pays 4.61%, the key advantage is that savers can keep the full interest tax-free, delivering a real-term gain of £171.

“With inflation expected to move even higher, savers should pay close attention to where their money is held rather than assuming their existing rate is doing enough. Now may be the time for savers to check their rate, and shop around as it could make the difference between their savings growing in real terms or quietly losing value.” 

*Data note: Please note that these savings product numbers include deals that are available to UK residents (easy access accounts, notice accounts, fixed rate bonds, variable Cash ISAs and fixed Cash ISAs) and exclude regular savers, children’s savers, variable rate fixed term bonds or ISAs, JISAs and LISAs, based on a £10,000 deposit, gross rates. Higher rates may be available for other levels of deposit.