It has long been a tough environment for those hoping to get a good return on their savings, and these days a cash ISA might just prove the best option if you're after a safe place for your nest egg.
How does a cash ISA work?
Each new tax year, savers are given a tax-free allowance to place in a cash ISA. These allow you to gain tax-free interest on your savings without any risk attached. While interest rates are still a long way from the 'ISA boom' of a few years back, at least you'll keep whatever you earn on your money. Some cash ISAs allow you to access your savings a fixed number of times within a 12-month period, and each will have its own minimum amount with which you can open an account. If you already have money in the previous year's ISA, some providers will let you transfer the balance for a better return on your investment, but only up to the maximum tax-free allowance.
As of 6 April this year, the amount you can place in your one cash ISA for the year is £5,940.
Current best buys
Coventry Building Society - 3 Year Fixed Rate ISA
A fixed rate ISA will often come with a better rate of interest, and such is the case with Coventry's 3-year offering, which will give you 2.75 per cent on your money. There are drawbacks, however. The account does not allow partial withdrawals, nor transfers from other accounts, and you will need the full 2013/2014 allowance of £5,760 to open the account.
Halifax - 4 Year Fixed Rate Cash ISA
If you don't need to access your money and are happy to let it gather interest over a period of four years, then Halifax are currently offering two per cent on their fixed rate deal. You can open the account with just £500, and the account allows you to make further deposits within the first 60 days. You won't be able to access the cash without closing the account early though, and this will mean you lose interest on your investment.
Britannia - Select Cash ISA 2
For those that prefer to have the option to get their hands on their cash in an emergency, Britannia's Select ISA is a possible option. You can make two withdrawals in a 12-month period, and furthermore, you can top up your balance throughout the year. You'll need £500 to open the account, but the rate is reasonable for 2014 at 1.75 per cent.
Nationwide - Flexclusive ISA 7
Instant access to your money throughout the year means you'll get a pretty paltry interest rate, but Nationwide's Flexclusive account offers 1.75 per cent. You can open the ISA with as little as £1 and make deposits and withdrawals whenever you want. If you start out with the full allowance and withdraw money though, you won't be able to replace the cash until the next financial year. The downside is that it's only open to those who hold a FlexAccount with at least £750 a month going in, a FlexDirect or FlexPlus account, or those that switch or have switched their current account to Nationwide within the last four months.
Skipton Building Society - 5 Year Fixed Rate Cash ISA
If you're willing to lock your cash away for the next five years, Skipton is currently offering the best interest rate at 3 per cent. The account allows you to transfer money from other ISAs, and you'll only need £500 to open an account. Partial withdrawals and transfers are not permitted, but you can make payments after opening the account.
*Details correct at time of writing
Have you spotted a great cash ISA deal for the upcoming tax year? Leave your comments below...