When you put money into a savings account, you expect it to grow.

But in today’s economic climate, that’s not always the case. More than half of UK savings accounts are now paying interest rates below inflation, meaning your money is losing value in real terms.

A recent Which? study highlights the scale of the issue.

In July 2025, only 48% of UK savings accounts offered returns above inflation, compared to 65% in June and 88% at the start of the year.

With inflation at 3.8% in July, many savers are unknowingly falling behind their financial goals.

Which savings accounts beat inflation?

According to Moneyfacts data, 1,093 savings accounts currently pay rates higher than July’s 3.8% inflation figure.

These include instant-access, fixed-rate bonds, variable-rate deals, and Cash ISAs.

However, the type of account makes a big difference. While just under half of all savings products outperform inflation, that number rises to 64% when considering fixed-rate accounts only.

For savers wanting certainty, fixed-rate bonds remain one of the more reliable ways to outpace inflation.

How savings rates compare against inflation

To preserve the real value of your cash, you need an account offering a rate above the Consumer Price Index (CPI).

If your account pays less, the purchasing power of your money is shrinking over time.

  • Fixed-term bonds: Since October 2023, the average one-year and longer-term bonds have generally beaten inflation. The gap is narrowing, with inflation only around 0.11 percentage points below the average long-term rate.
  • Instant-access accounts have been lagging since April. In July, the average rate was 2.68%, more than one percentage point below inflation.

Why are savings rates falling?

Savings rates surged after the Bank of England (BoE) raised the base rate 14 times between December 2021 and August 2023. Since then, the trend has reversed.

The BoE has cut the base rate four times since last August, reducing it to 4% on 7 August 2025. As a result, average savings rates have drifted lower.

Read how savers are missing out on free money

  • Instant-access: The hardest hit, slipping from 3.1% AER in August 2024 to 2.64%- a two-year low.
  • One-year fixed: In January, deals of 4.77% were available; top offers now sit just below 4.5%.
  • Five-year fixed: More stable, with market-leading accounts typically above 4.5%.

What about Cash ISAs?

Cash ISAs let you save up to £20,000 tax-free each tax year, but they’ve also felt the impact.

Instant-access ISA rates rose slightly in early 2025, then fell from April. Fixed-rate ISAs dropped sharply between April and June, before nudging higher as markets priced in fewer BoE cuts.

Many analysts now expect one further cut in 2025, likely in December.

Saver tip: Compare your current rate to CPI. If it’s lower, consider switching to a competitive fixed-term account or using your ISA allowance.

Protecting your savings

  • Check your account’s AER against inflation.
  • Consider locking into a fixed rate if you don’t need immediate access.
  • Use your ISA allowance for tax-efficient returns.
Next step: For tailored guidance on savings accounts beating inflation, speak to an Independent Financial Adviser. We’ll review your accounts, compare the market, and build a plan to help your money keep pace with inflation.