Earn inflation

Savers have been getting a raw deal in recent months, and rising inflation has dealt yet another blow - making it harder than ever to get a good return on your hard-earned cash.

Inflation, as measured by the Consumer Price Index (CPI), leapt up from 1.9 per cent in November to 2.9 per cent in December - the biggest monthly increase since records began.

And as inflation reduces the future buying power of your cash, high inflation rates create serious problems for savers.

In fact, a basic rate taxpayer will now need to earn 3.6 per cent or more before tax to maintain the "real" value of theirsavings pot; the figure is even greater for higher-rate taxpayers, who now have to earn a rate of at least 4.8 per cent.

Rising inflation

Spiralling inflation, coupled with low savings rates, means many accounts are now effectively worthless when tax on the interest they pay is deducted.

And, with interest rates held at 0.5 per cent yet again this month, the outlook shows little sign of improving.

If you stash your money away in an account paying a low rate of interest, your actual rate of return after inflation will be negative, so it's important to fight back to maximise the returns on your money - though be prepared - this is no easy feat in a rising inflationary environment.

Review your rate on your easy access account

First off, you need to check the rate you're earning on any easy access accounts you hold.

Currently, one of the top rates you can get on an easy access account is 3.15 per cent from the Coventry building society; a higher rate of 3.31 per cent is on offer from the Cheshire building society, but this is a 30-day notice account and also includes a 1 per cent bonus for 12 months. *

Nonetheless, given that so few instant-access accounts are paying anywhere near the rate required to get a real return, you may need to move the bulk of your money elsewhere.

Get into a fix

At present, some of the highest rates are on offer to those who are prepared to lock their money away for at least a year in a fixed-rate savings bond.

FirstSave, for example, is paying 3.65 per cent on its one-year bond, while ICICI Bank is paying 4.25 per cent on its two-year bond; elsewhere, the State Bank of India is paying a huge 5.25 per cent on its five-year bond.*

However, you need to think carefully before committing to a fixed-rate account longer than one or two years, as if interest rates go up quickly, these offers could soon become uncompetitive.

Consider an Isa

When it comes to saving, an individual saving account (ISA) should be your first port of call, as you can earn interest on your nest-egg tax-free.

However, only a handful of cash ISAs currently pay enough to beat inflation.

If you're looking for an easy-access ISA paying above 2.9 per cent - the rate needed for a return - you could squirrel your money away with Manchester building society paying 3.01 per cent or Newcastle building society paying 3 per cent. *

It's also worth bearing in mind that fixed-cash ISAs offer a hedge against inflation; Leeds building society, for example, is paying 4.6 per cent on its five-year fix. *

Check out a regular saver

While regular savings accounts - where you agree to pay in a set amount each month - offer some of the higher rates in the savings market, there are still only a few accounts on offer which beat inflation.

Stroud & Swindon building society, for example, is paying 4.5 per cent on its variable rate regular saver, while Buckinghamshire building society is paying 4.12 per cent.*

However, you must check the terms and conditions, as these accounts often come with restrictions; rates tend to be fixed only for one year during which you cannot access your funds without penalty, and you may be penalised if you fail to invest on a regular basis.

Keep a close eye

Savers may be able to take heart from forecasts that inflation will start to fall back later this year, but in the meantime, you cannot afford to sit back and relax.

Keep a close eye on what you're being offered and be proactive about shopping around to find a good deal to ensure you're getting good returns going forward; and never drop your guard, as high inflation is sure to return at some point.