The best savings accounts - where to keep your money

Caroline Cassidy

The recession has had its winners and losers - while borrowers have recently benefited from lower interest rates, savers have suffered as a result of the rock bottom Bank of England base rate.

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However, interest rates are likely to rise (at some point), and if you have any cash to spare, a savings account will allow you to start building that nest egg back up.

Which account?
The vast array of savings products on the market means finding the right one can be a tricky business. In order to make sure you are putting your money in the right place, it is important to ask yourself a few questions.

For instance, will you be putting money away on a monthly basis? Do you need instant access? Which account you choose will depend on your answers to such questions but to help you out, here is a brief overview of the accounts available.

If you have a lump sum to put away, an ISA is a good place to start. Every adult in the UK receives £10,680 a year in tax-free savings - this means that you won't be taxed on the interest that you earn on your savings.

Of that annual allowance, only £5,340 can be used for a cash ISA. An easy access cash ISA will allow you to withdraw money whenever you want but once it's out, you can't put it back in within the same year. Though you can only open one cash ISA each year, you are free to take advantage of better deals when the new tax year begins so do keep an eye open for the best deals.

Among the better current deals are West Brom Building Society, which is offering a cash ISA with 3.07 per cent interest if you bank online (minimum deposit of £1,000 required), and Northern Rock, where you can open a cash ISA with as little as £1 and get a 3.05 per cent interest rate.

The remainder of your allowance can be put into a stocks and shares ISA but there are many different types and it is worth speaking to an independent financial advisor (IFA) for expert advice.

Regular savings account
If you are keen to squirrel away a few pounds each month, a regular savings account is the way to go. These often offer the best interest rates but you may be hit with a strict set of terms and conditions - the number of withdrawals you can make annually may be limited, or you may be tied in to making a deposit each month so do check the small print.

Bear in mind too, that you will be taxed on a regular savings account so if you have a lump sum to start with, it's worth filling up your cash ISA first.

Good deals currently on the market include the West Brom's Regular Saver Adult account, which pays 4.1 per cent for 12 months as long as you save between £10 and £250 each month but you will not be able to access the money during that year.

Alternatively the Saffron Building Society offers four per cent fixed for 12 months and you can make unlimited withdrawals.

If you're already a First Direct customer, take advantage of their Regular Saver offer, which is paying a sizeable eight per cent for 12 months. However, you will not be able to withdraw money during the year.

Fixed rate savings
For those who are unlikely to need their savings cash in a hurry, a fixed rate savings account could be the best deal.

Accounts are available where you can obtain a fixed rate for anything from one to five years. Good rates are on offer but, of course, you run the risk of missing out if interest rates sky rocket before you can switch accounts or withdraw the money.

A minimum deposit is usually required, although some providers can start you off with just £1. The longer your fixed rate deal, the higher the interest rate - for example, get a one-year fixed rate account with the Post Office and you'll received 3.41 per cent interest, but with a 3-year fixed account you'll get 4.21 per cent.

The best interest rates and deals do, of course, change on a regular basis so it is always worth checking online comparison sites. And if you are uncertain as to which type of account would be best for your personal situation, speak either to your bank or an IFA.