End of the tax year - what to do with your savings

Maya Driver

With interest rates low and money tight it's a difficult time for savers. Add to this the fact that inflation is high and you could really struggle to get a decent return on your money. So with time running out to invest this tax year what should you do with your cash?

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There are still some good deals out there you may just have to work a little harder to find them. The Bank of England has warned that inflation could well hit three and half per cent this year which means many saving accounts, with rates of around one and half per cent, won't earn you enough to keep pace with the cost of living.

If you haven't done so already you need to consider an ISA. This is a tax free form of saving which means you only have to better the rate of inflation to be in the money. You will have to invest before 5th of April to take advantage of this year's allowance. Currently you can invest £3,600 in a cash ISA or £5,100 if you are over 50. After 6th April the allowance will rise to £5,100 for everyone.

It's worth shopping around for the best rates. The Alliance and Leicester Flexible Account ISA has a rate of three and a half per cent. This is only available to new savers; you can't transfer existing ISA savings in. However, better rates are available if you can afford to lock you cash away. The Nationwide is offering four and half per cent on its five year Fixed Rate ISA bond. Alternatively, you could opt for the Marks and Spencer Money's three year fixed rate cash ISA. This weighs in at a respectable four per cent.

These are pretty secure savings, even in these troubled times. The government has guaranteed the safety of your money up to the value £50,000 per institution. However, if you want to put more money out of reach of the taxman but are prepared for a little bit of risk you could invest in an equity ISA. This will add a further £3,600 (£5,100 next tax year) to your allowance. This ISA invests your money on the stock market, in property or bonds. You can use a financial advisor, although this will cost you fees. You could try a fund supermarket, which still charges but a lot less.

You may have heard about bonds and these can certainly achieve some good rates on your investment. The only catch is you have to tie your cash up for a set period to achieve the best results. The higher rates tend to be reserved for the longer term bonds so if you want to get over five per cent on your nest egg you will have tie up your money for five years. The AA offers 5.1 cent for their five-year bond. A far cry from many of the savings accounts which barely rise above two per cent.

What about Premium Bonds? This is an investment which offers the investor the chance of winning tax free prizes instead of regular interest. To invest in Premium Bonds you need to make a minimum purchase of £100 or £50 if you pay via standing order. You are allocated a series of numbers (one for each pound). Each number has a chance of winning a prize. There's a million pound jackpot at stake as well as lots of other cash prizes. You can cash your bonds in at any time so you know your cash is completely secure.