⚡ Quick Answer
Your savings are beating inflation if the account’s AER is higher than the current UK CPI rate. In mid-2026, CPI is around 2.6-2.8% while the best easy-access savings accounts pay 4.5-5% AER — a real return of roughly 1.7-2.2%. The average easy-access rate across the market is around 2.8% — barely keeping pace. The most common reason savings fail to beat inflation is leaving money in a legacy low-rate account at a major high-street bank. Switching takes 20-30 minutes and can mean hundreds of pounds more annually.
There’s a quiet way savings can work against you: the balance grows, the number gets bigger, but each pound buys slightly less than it did last year. This is the effect of earning below the inflation rate — real purchasing power falling even as the nominal balance rises.
Whether your savings are keeping pace with prices is one of the most practically important checks you can make, and most people have never done it.
Real Returns Explained
The real return on savings is simply: interest rate minus inflation rate. If your account pays 4.5% and inflation is 2.7%, your real return is approximately 1.8%. Your purchasing power is genuinely growing — £10,000 this year will buy more than £10,000 did last year.
If your account pays 1.5% and inflation is 2.7%, your real return is minus 1.2%. The number in your account is higher, but each pound is worth less. You have more pounds; they buy less. That’s a real loss even without anything leaving your account.
Where UK Inflation Stands in 2026
CPI inflation peaked above 11% in late 2022, driven by energy shocks following the pandemic and the Ukraine conflict. By mid-2026, it had fallen to approximately 2.6-2.8% — still above the Bank of England’s 2% target but dramatically lower than the peak. The Bank expects inflation to settle toward target over the next year, though forecasters disagree on the timing.
For savers, this is considerably more favourable than 2021-2022 when savings rates were near zero and inflation was soaring. Today’s best savings accounts beat current inflation comfortably. The problem isn’t the rate environment — it’s that most savers are not in the best accounts.
How to Check in Three Steps
- Find your current savings rate. Log into your account and look for the AER. If it’s not clearly displayed, call the provider.
- Find current UK CPI. The Office for National Statistics publishes this monthly — search “ONS CPI” for the latest release.
- Subtract: your rate minus CPI. Positive result = beating inflation. Negative result = losing ground in real terms.
Most people who do this check find one of two things: either they’re with a competitive provider and doing well, or they’re on a legacy rate from a big bank that hasn’t changed in years and is comfortably below inflation.
The Gap Between Average and Best
The gap between the average UK easy-access savings rate (around 2.8% in mid-2026) and the best available (around 4.5-5%) represents significant lost interest. On a £20,000 balance, the difference between 2.8% and 4.5% is roughly £340 per year — for doing nothing but switching. On £40,000 the difference is roughly £680 per year.
The reason most savers stay in underperforming accounts is inertia, unfamiliarity with challengers, or trust in the familiar name of a major bank. All understandable. All financially costly.
What to Do If You’re Behind Inflation
Switch to a higher-rate account. Our guide on how to choose the right savings account covers which account type fits which situation. For longer-term savings, our guide on easy-access vs fixed-rate savings helps you decide between flexibility and better rates.
For money with a 5+ year horizon, investing in a stocks and shares ISA has historically produced real returns considerably above inflation, though with more short-term volatility than cash. Worth considering for long-term savings already significantly exceeding your emergency fund target.
Frequently Asked Questions
Which inflation measure should I compare my savings rate against?
Use CPI (Consumer Price Index) — it’s the Bank of England’s target measure and the most widely cited benchmark for this comparison. CPIH includes housing costs and runs slightly higher. RPI is now mainly used for legacy contracts. CPI is the right comparison for personal savings decisions.
Does the type of savings account affect the real return calculation?
The AER is the AER regardless of account type — whether ISA or non-ISA, easy-access or fixed. The calculation is the same. The tax treatment affects your effective after-tax return (which matters more for higher-rate taxpayers), but the base calculation uses the headline AER versus CPI.
For monthly CPI data, visit ONS inflation releases.
