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Low saving rates mean you’re losing out in real terms against the inflation rate. So what can you do? Here are my top places to put your cash to make as much as 5%.

(This article is updated in the middle of each month after inflation rate announcements and any significant account changes)

When prices for goods and services are on the up it’s called inflation, and the inflation rate is just the average of those increases. But if your income – whether from a salary or savings isn’t keeping up with that rate, then the cost of living is going to be more expensive.

The latest inflation rate for March was 1.5%. This rate means only a handful of savings accounts now beat it, and the vast majority of accounts are well below this. 

We’re a long way now from when we could get 5%, with rates slowly dropping over the last few years. And for the last few months we’ve seen another run of drops across leading savings accounts.

In May Nationwide reduced the rate on it’s FlexDirect from 5% to 2%, while TSB’s Classic Plus account was cut from 3% to 1.5%. And the market-leading easy-access savings accounts such as the one from Marcus has been cut twice in three weeks and now stands at just 1.05%.

If they haven’t yet, more will follow now the base interest rate has been cut to an all-time low of 0.1%.

Fortunately, there are a handful of places where you can beat the current rate. Here are my picks of inflation-beating instant-access accounts for your cash savings.

2.75% interest 

These accounts are all Regular Savings. You can only open these accounts if you have or open a current account with these banks – but that’s no reason to put you off.

Regular or monthly savers work differently to normal saving accounts. For a start, there’s a limit to how much you can save each month, and the interest is calculated on the balance each month. After 12 months the interest is paid and your saver closed. But you can then open up another and begin again.

These are ideal if you only have a certain amount of money to put aside each month, or to move money every month from a lower-paying easy access account.

First Direct (Regular Saver) – 2.75%

This is my top pick as it allows monthly deposits of up to £300. Pay in the full amount over a year and you’ll make £53.40 in interest.

HSBC (Regular Saver) – 2.75%

The monthly maximum is a slightly lower £250 a month, meaning you can put aside £3,000 over a year and earn up to £44.50 in interest. 

Marks & Spencer Bank (Monthly Saver) – 2.75%

This is the third regular savings account. You’ll be able to save a maximum of £250 a month.

Lloyds Bank (Monthly Saver) – 2.5%

If you have a Club Lloyds bank account (which comes with a free magazine subscription) you can open a linked monthly saver paying 2.5%. You can pay in a max of £400 a month.

If you have a standard Lloyds account the monthly saver rate is a lower 2% and there’s a limit of £250 a month.

2% interest 

Both of these accounts can be opened by anyone, you don’t need to be an existing customer. One option is a current account so you can save more upfront at this rate, the other is another regular saver.

Nationwide FlexDirect (current account)

This is the highest paying account, and you can access your money at any time. However the amount of money you can save in them is limited.

You can get 2% for one year on a balance up to £2,500 with the FlexDirect account. You do need to pay in £1,000 a month to get this rate.

Afterward the first year it will drop to 0.25%, but you can always switch away when that happens (and hopefully get a nice cash bonus for doing so).

You’re able to get the 2% on both a solo account and a joint account, so it’s worth opening a joint account too if you’re in a relationship (though watch this video first).

Halifax (Regular saver) – 2%

As with the other Regular Saver accounts you only get this rate for 12 months, and the interest is paid in full on the anniversary date then your account is closed. 

However this is open to anyone and you don’t need a Halifax current account. There’s a monthly limit of £250 and you’ll get paid the 2% in interest after the 12 months.

Other savings accounts

The above accounts all have caps on how much you can save, so what should you do with any additional money? Well if you want easy access you’ll struggle to beat inflation, but you will probably beat rates from most other providers.

You can also fix your savings for a year or longer and get a slightly better rate in return. However, you need to be sure you won’t need access to that cash over that time. The longer you fix, the greater the risk you’ll lose out if rates were to rise. But at the same time they’re protected if rates were to fall.

A great place to check out all the different accounts is the Moneyfacts website. Make sure you untick the box that says it’ll display accounts with links first.

Here are a few for you to consider

Zenith Bank (1 year fix) – 1.53%

This account from Zenith has a minimum opening balance of £1,000 so it won’t be for everyone. But if you’ve used the Nationwide and various regular savings accounts above and want to lock in a rate, you won’t get much better.

TSB Classic Plus (current account) – 1.5%

The TSB Classic Plus offers interest on far a lower balance – you get the 1.5% on just £1,500 – but there’s still the potential to get three of these accounts if you and your partner have one each and open a joint account. You need to pay £500 into the account every month to get the interest.

Halifax Reward (current account) – 1.2% (equivalent)

From 1st June 2020 the Halifax Reward account is changing. You need to opt-in, but if you do it’s possible to get £5 a month as a “reward”. There are two ways to get this.

One is spending £500 on your debit card (though other cashback credit cards can beat this), or you can get if there is £5,000 in your account every day of the month.

If you do this every day of the year, you’ll get £60, which though it’s not interest, is the equivalent of 1.2%.

However, have less in the account for just one day of a month and you get nothing. And £5k is a lot of money for most people, especially as you can get better rates at Nationwide and TSB first.

Here’s my rundown of how this new Rewards account will work.

NS&I Income Bond (easy access) – 1.16%

This Government-backed bond will pay 1.16% with a minimum investment of £500, though that’s also the minimum withdrawal amount.

Marcus (easy access) – 1.05%

This account from Marcus by Goldman Sachs recently dropped (again) to 1.05% so it’s likely it won’t be dropped again for a while (though I thought that would be the case when it was cut from 1.3% to 1.2% a few weeks ago).

Check out all the latest banking deals:

The best bank switching, cashback and interest offers (May 2020)

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