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For this week’s guide, Anna Bowes, personal finance expert from The Private Office, takes a look at the inflation-busting savings account on the market…

Inflation is proving to be sticky at 3.8% and that doesn’t tend to work out positively for a lot of us. 

Retired people on fixed incomes are likely to be worse off as inflation cuts the real value of their pensions and other savings.

If your money is locked away in an account that pays less than that 3.8% rate, the value of your money has decreased. 

Essentially, £10 is now worth £9.62 – so if your interest rate hasn’t made up the difference, you’ve lost money.

Bowes explains that for basic rate taxpayers who have fully utilised their personal savings allowance, the interest they need to earn is even higher at 4.75% gross. 

For higher rate taxpayers, it’s even more difficult as they need to earn 6.33% on a taxable account to match inflation – an impossible task at the moment.

“Unfortunately, with inflation remaining sticky, this means that for taxpayers who are already using their PSA and ISA allowances, all you can do is to choose the best rates in order to at least mitigate the damaging effect of inflation on your savings,” she says. 

Here, Bowes takes a look at the savings accounts that are offering rates higher than inflation… 

Easy access accounts

The top three accounts have all remained the same over the last few weeks, but the average of the top five has dropped slightly as there have been a few withdrawals. 

Money app Snoop’s recently launched Easy Access account is paying a very competitive 4.35% AER. 

Chase is offering an account with 4.75% AER, but only for those who are prepared to open a current account with it, too. 

Santander has an Edge Saver account which pays 6% AER on balances of up to £4,000 – but only for 12 months and only if you also hold a Santander Edge Current Account, which comes with a monthly fee. 

Easy access cash ISAs

Cash ISAs can be helpful as any interest earned is tax-free. 

Plum has increased its rates once again – now paying 4.37% AER – just behind the Principality Online Bonus 5 Access Cash ISA Issue 5, which is still paying 4.40%. 

As the name suggests, this Principality account allows just five withdrawals a year, which includes closing the account. 

The Plum ISA is also restricted – it allows only three penalty-free withdrawals, after which the rate will drop to 3.04% for the remainder of the year.

The top unrestricted easy access cash ISA is with the Marsden Building Society. Its Online Cash ISA (Issue 6) is paying 4.3%. 

“That’s still half a percentage point higher than the current rate of CPI inflation, so worth consideration if you’re not sure how often you might want access to your money,” Bowes says. 

Fixed rate bonds

In the one-year table, the market-leading account comes from Chetwood Bank, offering 4.45%. 

Two-year fixed term bond rates remain steadier, with Birmingham Bank stepping into the top spot with a new bond paying 4.44%. 

And an increase from JN Bank from 4.41% to 4.43% means that the average of the top five is still 4.42%.

Birmingham Bank is also the main contender in the five-year table, actually producing a rate that is higher than the top rate a month ago.

“Once again, longer term bonds are paying more than shorter term, but unless you don’t pay tax on your savings interest, the net rate on even the top paying accounts will not keep up with the rising cost of living at its current level,” Bowes says. 

Fixed rate cash ISAs

The one-year and two-year top ISA rates have dipped slightly in the last couple of weeks, but the top three-year rate has remained the same at 4.23% and the best five-year rate is up slightly, from 4.25% to 4.26%.

“Although the top fixed term ISA rates are paying less than the before tax rates on the equivalent fixed term bonds, as all interest earned is tax-free, for those who are fully utilising their Personal Savings Allowance and therefore set to pay tax on their non ISA savings, cash ISAs should actually put more pounds in your pocket – and importantly help to keep up with inflation,” says Bowes. 

For example, the top fixed rate bond is paying 4.45% before tax, whilst the top 1-year ISA is paying 4.27%. 

A basic rate taxpayer with a deposit of £20,000 would take home £854 from the ISA, but just 3.56% net from the bond – so £712 over 12 months.