Get a corking rate of interest

WE have become a nation of losers.

With many accounts and cash ISAs paying under one per cent interest, losings feels a better description than savings.

Yet reports of the death of decent interest is exaggerated; its corpse isn't just twitching, it is alive 'n' kicking, with five per cent possible if you know where to look.

CORKING: Treat interest like a champagne fountain

And that is what I want to show you.

Yet the days of just stashing cash in the quiet assumption that it will grow are dead. To get returns, you need be an active, aggressive saver.

Everyone should urgently check their rates, NEVER think that because it was a top payer when you got it, it still is. If it is under three per cent, you need to follow this guide to see if you can DITCH, SWITCH and get a bit RICH.

A year ago this week, a financial earthquake struck. Attempting to forestall recession, the Bank of England scythed Base Rates by a previously off-the-Richter-scale 1.5 per cent.

This tremor was repeated until rates bottomed at 0.5 per cent in March, literally the lowest for CENTURIES, and they haven't moved since.

While mortgage-holders celebrated savers screamed. And now even those savvy savers who quickly locked in at high fixed-rates, are seeing them end.

Yet, the good news is that while Base Rate hasn't moved, savings rates have. Increased competition to attract savers has forced some rates back up.

But it's not just about rates, you need pick the right type of savings account too. Imagine a champagne fountain, pour money in at the highest level and when full, it overflows to the next best, and so on.

FIRST LEVEL: CASH ISAS

Start here with these special accounts where you can stash up to £3,600 - or £5,100 if you are aged 50 plus - every tax year (April to April)

Their big bonus is that the interest is tax-free. Normally basic-rate taxpayers lose 20 per cent of it to the taxman; higher-rate taxpayers lose 40 per cent. And once inside a cash ISA it remains tax-free year after year. Yet don't think that once the money's in, it's locked down. If the rate drops, you can transfer this or past years' ISAs elsewhere. But if you withdraw the cash to do this it loses its tax free status so ask your new provider to move it for you.

Best Payers: First Direct's three per cent AER is guaranteed until November 2010, but after that the rate plummets, so transfer then. The next best is Standard Life at 2.65 per cent. Full best buys at www.moneysavingexpert.com/cashISAs

SECOND LEVEL: REGULAR SAVINGS

The first overflow level is Regular Saving Accounts, purely because some of them pay MEGA-HIGH interest - but they often get overlooked by best buy tables.

With these you MUST pay in every month. The reason they can pay top rates is that they severely restrict how much you can save and only last a year. Then they sweep your cash into accounts paying pitiful interest, so be ready to shift your money ASAP.

Best Payers: Norwich & Peterborough's pays five per cent AER fixed for a year, if you save £1 to £250 a month. More best buys at www.moneysavingexpert.com/regularsavers

THIRD LEVEL: NORMAL SAVINGS

For the rest of your cash, just use a normal savings account paying the highest interest possible.

Best Payers: Citibank's easy-access Flexible Saver currently pays new customers 3.3 per cent AER (min £1) including a 2.25 per cent year-long bonus. In the old days, I railed against such short-term bonuses but in today's climate it actually acts as a minimum rate guarantee.

Like most accounts this is variable rate, so could change. Alternatively, if you're prepared to lock money away for a year, NS&I is 3.95% fixed and as it's government backed is 100% safe - even if you put int he max £1million.

Get full instant access and fixed best buys at www.moneysavingexpert.com/topsavings

BEFORE YOU START..

1. FIRST, pay off debts. £1000 on an 18 per cent credit card costs £180 a year while the same in a savings account paying two per cent after tax earns £20. If you'd repaid the debt rather than saved, you'd be £160-a-year better off.

2. CONSIDER repaying mortgages. Those who CAN repay without penalties should consider it if the mortgage rate's higher than what you can earn after tax on savings. But always keep some emergency cash back. Full guide at www.moneysavingexpert.com/repaymortgage

3. IS it safe? Everyone with money in a UK bank has the first £50,000 per person, per financial institution guaranteed. So if you've more, spread your savings to keep 'em protected. Watch for non-UK accounts. Some EU banks use their home country's protection instead. This shockingly includes the heavily-advertised Post Office savings (not NS&I) as it's actually part of Bank of Ireland. If it went bust, you'd rely on Ireland's troubled economy to look after you. No banks like this feature in my picks. And beware merged banks like Halifax & Bank of Scotland - they count as ONE institution so the £50,000 limit's shared. Check your bank at www.moneysavingexpert.com/safesavings

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TV Money Guru Martin Lewis is the creator of the consumer revenge website www.MoneySavingExpert.com which is packed with info on how to get more money in your pocket.

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