Consumer Prices Index (CPI) inflation may have fallen to 1.9 per cent but it is still hard to find a cash individual savings account (Isa) that beats this unless you are prepared to lock up your money for at least two years. Finding accounts that beat Retail Prices Index (RPI) inflation, currently 2.8 per cent, is even harder. But you may be an investor who needs to hold a very low risk asset such as cash, while for many it is necessary to allocate at least a portion of your savings to this.
Locking up your cash for a fixed term increases risks for savers because although you can earn interest rates as high as 3 per cent, according to data from Moneyfacts.co.uk, there are a number of disadvantages.
Fixed term accounts typically do not allow you to access your money before the term is over without incurring a penalty, typically a loss of a certain amount of the interest you would have earned.