Lora Boruke, the well respected journalist and commentator in matters financial has said in a recent article that the only way you can beat inflation is by opting for a tax free cash ISA.

According to her research the best rate is on an ISA from Aldermore Bank which is paying 3.6% tax free on sums of £3,600 to £43,200, she goes on to comment; this allows you to transfer in balances from other ISA providers.  The rate is fixed for two years and is equivalent to a gross rate of 4.5% for a basic rate taxpayer or 6% to a 40% taxpayer.  But if inflation moves above its current rate of 3.5% you could still be out of pocket.

The top rate on a variable Cash ISA is from Newcastle Building Society which is paying a pathetic 3% on 120 days notice.  At this rate it’s hardly worth bothering about – although bear in mind that if rates improve and you didn’t use your ISA allowance you will miss out on tax free income.  Be warned that providers have a nasty habit of reducing variable rates once they have attracted enough money so you need to keep on your toes.

Regular Savings

One way to get a better return on your money is to feed cash into regular savings accounts but the sums involved are small.  Nottingham Building Society is market leader paying 5.01% fixed for one year on regular savings of £10 to £100 a month.  Nobody is going to get rich quick on this. 

You could, of course, take out several accounts with different providers to up the amount saved.  Stroud & Swindon Building Society is paying 4.5% variable on sums of £10 to £250 a month and there is a whole raft of other providers offering rates of 4% to 4.5%.  You could invest a total of £2,100 a month, £25,200 over the course of a year, if you put the maximum into all seven accounts offering 4% or more.  Watch out though – the terms of these accounts mean that savers will lose interest if they withdraw cash before the end of savings period.

Instant Access

If you are likely to need your money in a hurry the top paying instant access account is from Scarborough Building Society which is paying 2.76% gross with no withdrawal penalties on sums of £1,000 or more.  You can only open an account on the telephone. For those who like to conduct their affairs online, Norwich & Peterborough Building Society has just launched the third issue of its popular E-Saver account – giving easy access with a current rate of 2.55% gross.  The account pays 1% variable and an extra 1.55% bonus will be paid on the first anniversary of the account opening.  Withdrawals are allowed at any time without penalty, as long as the account balance remains above £1. 

The account can be opened online and the opening balance transferred in, or by post, by printing an application form from via N&P's website and sending it with a cheque for the opening balance.  All other transactions must be carried out online.  The account may be opened by new and existing customers but funds must be new money to the Society.