CPI inflation remained steady at the Government’s target of 2% in June 2019, according to figures released by the Office for National Statistics this month. Unfortunately for savers this does mean that the Monetary Policy Committee (MPC) is not likely to be under pressure to raise interest rates anytime soon.
In the meantime, separate figures released in July showed that average wages - excluding bonuses - rose at a pace of 3.60% in the three months to May. This is now at a level not seen since before the 2008 financial crisis. However, according to economists, there is little sign of underlying rising inflationary pressures despite this continued pay growth and therefore it is likely to be too early to be thinking of a rate cut.
These sentiments were supported by the unanimous vote this week at the latest MPC meeting to leave the base rate as it is, making it 12 months since it last changed.
Petrol and diesel prices were a contributing factor in keeping CPI down as prices have fallen between May and June 2019 - compared to last year, when they increased.
The price of clothing and footwear counterbalanced this, as prices fell by less this year than they did this time last year. Prices usually fall between May and June as the summer sales season begins, but the fall in 2018 was the largest since 2012.
Whilst the effects of petrol and clothing may not impact everyone, the price of food increased this year, something that we will probably all feel the effects of. The main upward effect came from the price of fruit (with blueberries and raspberries as named culprits).
Virtual basket of goods
The rate of inflation is calculated by taking a year-on-year view on the price of a virtual basket of goods and services that are frequently used by many of us. It’s a big basket and includes items that some may never use - such as air fares or video games - which is why it’s always important to look at how your own cost of living is changing.
There are around 180,000 separate prices collected every month, covering around 700 representative consumer goods and services from around 140 locations across the UK. In addition, around 300,000 quotes are used in measuring owner occupiers’ housing costs each month.
What is included in the basket is reviewed each year to make sure that it stays representative and some items are added, removed or replaced.
For example, a smart speaker - such as the Amazon Echo or Google Home - has been added in 2019, as these were not previously included.
Flavoured teas have also been introduced due to their increased popularity, which is illustrated by the supermarket shelf-space devoted to them.
In terms of removals or replacements, washing powder has been replaced by washing liquid or gel.
And this year, envelopes have been removed from the miscellaneous printed matter and stationery part of the baskets, in part reflecting the increasing use of new technology for communication.
So, what savings accounts can help savers to match or beat the current level of inflation?
Although the inflation rate has remained steady, as competition among savings providers have waned a little as we embrace the summer, there are a few less accounts that match or beat inflation than last month, but there are still almost 140 to choose from.
As has been the case over the last couple of months, the shortest term that you’d need to tie up your money for is 12 months, although if you are a basic rate taxpayer and fully utilising your Personal Savings Allowance (PSA), you’d need to tie it up for at least three years if you want a net rate that at least matches the current CPI rate.
| Selection of inflating-beating standard savings accounts | ||
| Provider | Account Name | Gross Rate |
| Current Accounts | ||
| Nationwide | FlexDirect Account | 4.89% |
| TSB | Classic Plus Account | 2.96% |
| One year fixed term accounts | ||
| BLME | 1 Year Premier Deposit Account | 2.10% |
| Al Rayan Bank | 12 Month Fixed Term Deposit | 2.05% |
| Charter Savings Bank | 1 Year Fixed Rate Bond | 2.01% |
| Two year fixed term accounts | ||
| BLME | 2 Year Premier Deposit Account | 2.35% |
| Al Rayan Bank | 24 Month Fixed Term Deposit | 2.30% |
| FCMB Bank (via Raisin) | 2 Year Fixed Term Deposit | 2.22% |
| Three year fixed term accounts | ||
| BLME | 3 Year Premier Deposit Account | 2.55% |
| Gatehouse Bank | 3 Year Fixed Term Deposit | 2.45% |
| Arbuthnot Latham | Arbuthnot Direct - 3 Year Fixed Term | 2.32% |
| Four year fixed term accounts | ||
| BLME | 4 Year Premier Deposit Account | 2.45% |
| PCF Bank | 4 Year Term Deposit Issue 7 | 2.40% |
| RCI Bank | Fixed Term Savings Account - 4 Year | 2.30% |
| Five year fixed term accounts | ||
| BLME | 5 Year Premier Deposit Account | 2.75% |
| Vanquis Bank | 5 Year Limited Offer Fixed Rate Bond | 2.70% |
| Gatehouse Bank | 5 Year Fixed Term Deposit | 2.65% |
| Six/Seven year fixed term accounts | ||
| BLME | 7 Years Premier Deposit Account | 2.80% |
| PCF Bank | 7 Year Term Deposit Issue 9 | 2.75% |
| Shawbrook Bank | 7 Year Fixed Rate Bond Issue 3 | 2.40% |
Rates correct as at 02/08/2019
Higher rate taxpayers will struggle to find any standard savings accounts that pay 2% or more after higher rate tax has been deducted – however there are 15 cash ISAs that would do the trick. That said, the money would need to be tied up for a minimum of four years.
| Selection of inflating-beating cash ISA accounts | ||
| Provider | Account Name | Gross Rate |
| Four year fixed term cash ISA accounts | ||
| United Trust Bank | Cash ISA 4 Year Bond | 2.00% |
| Five year fixed term accounts | ||
| Newcastle BS | Five Year Fixed Rate ISA (Issue 31) | 2.12% |
| Metro Bank | 5 Years Fixed Rate Cash ISA (Issue 7) | 2.10% |
| Secure Trust Bank | 5 Year Fixed Rate Cash ISA (09.Aug.2024) | 2.02% |
| Six/Seven year fixed term accounts | ||
| United Trust Bank | Cash ISA 7 Year Bond | 2.30% |
Rates correct as at 02/08/2019
Check out our Best Buy tables to find the best savings accounts to meet your needs.
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