Fixed-rate savings vs inflation

Dogtag

If I get a fixed-rate savings account what happens if inflation gets really bad? I keep hearing stories that we might drop out of the EU without a deal and that this could mean a serious fall in the value of the pound and high inflation. Does anyone have any idea of how to protect savings in the above situation? I have lived with high inflation in the Middle East and it is not nice. At least on that occasion short term closed accounts were available that just about kept up within inflation but I can see nothing similar available in the UK. Any suggestion would be much appreciated. Thanks.

Neil_Jones

A fixed rate savings account is just that - x% for y years regardless of what happens with inflation whether it bounces along at 2% or 2000%.

There used to be some inflation trackers around which was basically that + 0.01% but they haven't been on sale for a while and show no signs of returning any time soon.

Unfortunately all bar a few fixed accounts, the 5% regular savers and the 5% current accounts won't beat inflation, and those that you do fix if inflations your rate won't change with it. Of course if inflation falls and you're locked in at 2.69% you're ahead. If it rises then those accounts join the rest of the pack.

Dogtag

So there's going to be a lot of unhappy people around if inflation does take off. I assume that the BoE will spend money to try and keep the rate down but I once experienced 1000% inflation and once tasted it's a bitter pill to swallow. Anyway thanks for confirming what I thought might be the case (always best to get a second opinion).

Voyager2002

If you believe that the pound will fall against other major currencies, then keep your savings in those currencies (although finding a decent interest rate in Euro is even more difficult than in Sterling). If you believe that we will experience high inflation (not necessarily the same as a fall against other currencies) then buy something that can be sold later and whose value will keep up with the general level of prices. The most obvious such "something" would be an appropriate basket of shares, but then of course you are mitigating the risk of inflation by taking on different kinds of risk.

username12345678

Voyager2002 wrote: »

The most obvious such "something" would be an appropriate basket of shares, but then of course you are mitigating the risk of inflation by taking on different kinds of risk.

Afaik investors in the early to mid 70s found equities lacking in their ability to protect from rampant inflation.