Good deals still exist for savers

By LUCY TOBIN FOR MAILONLINE
Updated: 12:17 EST, 8 January 2009

There are few good deals available to savers with some providers offering annual interest as low as 0%.

Search and rescue: save your nestegg from low rates by seeking out a good fixed-rate

But shopping around can find a better deal.

Put any spare cash into a tax-free Individual Savings Account. Each adult can put up to £3,600 into a cash ISA each tax year, plus a further £3,600 into a stocks and shares ISA.

The best instant-access option is Birmingham Midshires' 4% rate, or if you want to lock your money away at a guaranteed rate, Nationwide offers 4% for two years with its Fixed Rate ISA Bond.

The Tesco Internet Saver was the current market-leading savings account, offering 6% for the first year, including a bonus. This was recently cut to 5.1% and the bonus rate has now been removed, giving a rate of 3.6%.

Spread your cash around different institutions but ensure each is regulated by the Financial Services Authority in the UK.

The Government guarantees up to £50,000 per person per one account in UK-regulated banks and building societies.

More than 20m people have invested in tax-free Premium Bonds, which offer savers the chance to win a share in a monthly prize draw instead of paying out interest.

But the size of the pot of winnings is linked to the Bank of England's base rate and your chances of winning have dropped 36% over the past year.

Riskier but potentially higher returns are available on equities.

Shareholders in HSBC, for example, can gain 8.7% yields, although, particularly in the current climate, dividends are not guaranteed.

For cautious savers who are willing to lock up cash for a year or more, fixed bonds offer higher returns than standard savings accounts.

Yorkshire Building Society gives a return of 4.55% if you sacrifice access for six months.

Editors note: As pointed out by some readers the rate on the Tesco account changed on January 8th, removing the bonus. It now pays 3.6%, the article has been amended accordingly.