Fixed Bonds and Variable Deals

Falling inflation is mixed blessing

Low returns wouldn't be such a huge downer if it weren't for the enormous elephant in the room: inflation.

Prices had been shooting along. Two years ago, inflation on the consumer prices index hit 5.2 per cent.

The good news is the pace has slackened. CPI now stands at 1.6 per cent (March 2014 figure).

However, the inflation fallback eases the pressure on the Bank of England to hike the base rate from 0.5 per cent. Until that happens, savers' cash will struggle to grow in real terms.


Banks are fleecing savers. They suck you in with a good rate, then cut it once you've stopped paying attention. Don't stand for it.

What's going on today with today's savings rates?

• Isas

Historically, rates on Isas have been best in 'Isa season'. Every year, between February and May, swathes of savers rush to use up their tax-free Isa allowance so that's when competition is most intense.

The allowance for the 2014-15 tax year is £5,940. However, July will see the launch of the super Isa. This will allow savers to stash away £15,000 in the tax-year in a cash Isa. It remains to be seen what impact this will have on rates. For now, you can see our five favourite Isas. We maintain this year-round, sifting through the catches to list only the genuine best deals.

You should also use our independent Isa savings tables for the best buy accounts.

• Fixed-rate bonds

Today's best bond is Shawbrook's 3.10 per cent - but you have to tie your cash up for five years to get it. An adage applies here: the longer the fix, the better the rate. The best fixed-rate bonds can be found in our best fixed rate bonds table.
At the end of 2013, there was a mini-battle at the top of the five-year fixed rate table as providers entice savers into locking their money away until 2018 - while one provider launched a 10 year fixed-rate account (which has since been shut).

• Bonus accounts

Today's top rates crash by up to 95 per cent after just a year. The thing is, without the introductory bonus, there isn't much value around. You have to keep a close eye on these and move your cash quickly after 12 months or you could lose out. Keep regular tabs. We've launched a campaign to persuade banks to display rates on customers' internet banking pages. See 'Time to end the great savings rates cover-up'.

CUT TO THE CHASE: What should I do with my savings?

Fixed-rate cash Isas offer the best rates overall when you consider their tax-free status: Halifax offers two per cent fixed over eighteen months while Coventry Building Society 2.75 per cent over four years.

The problem with any fixed-rate account is that savers must be willing to lock their cash away and typically limit the amount they can put in each year.
The best buy easy access cash Isa comes from BM Savings, which offers 1.65 per cent.
Keep in mind that while the market predicts low rates for many years, there is no guarantee of this. If the stimulus measures from the government do stoke inflation, rates would have to rise. Locking into a deal for five years therefore carries risk.
Those who need secure income, such as pensioners may have little option, though. Others could mix variable rates in with medium-term bonds to boost returns.