COMMENT
Triple Your Savings Interest Today!

By Cliff D'Arcy
November 11, 2005

If you think that saving is a simple art, think again, because life for savers can be confusing and difficult!

Why, you ask? Well, it's largely because the range of savings accounts on offer is absolutely mind-boggling! Indeed, there are over four thousand different accounts out there, including children's, easy-access, fixed-rate, mini-cash ISAs, monthly interest, no-notice, notice, offshore, regular savings, TESSA-only ISAs and variable-rate accounts. Phew!

Hence, it's no wonder that so many of us end up keeping our nest egg or rainy-day money in inferior accounts. This is no joke, because UK residents have total savings of £541 billion, and choosing inappropriate savings accounts probably costs us, say, 2% of this sum. In other words, we're getting over £10 billion a year less than we should. Yikes!

Anyway, I'll make things a whole lot easier for you by showing you three simple ways to increase - even triple - your interest with almost no effort at all. Here's the first:

1. Cash mini-ISAs

These are an absolute no-brainer for every saver who is sixteen or over, so don't be put off by the fancy name, because these are nothing more than tax-free savings accounts! Before you rush off to put your entire life savings into a cash mini-ISA, you need to know the following:

• You can only open one cash mini-ISA per tax year (the current tax year runs from 6 April 2005 to 5 April 2006). Hence, a couple can open one apiece each tax year.

• You can only deposit a maximum of £3,000 per tax year. Hence, a couple can shelter up to £6,000 a year from the taxman's greedy mitts!

• All the interest you earn is tax free and, what's more, you don't have to declare it on your tax return, which is a bonus!

• Cash mini-ISAs are "headline" savings products, so banks tend to pay their best rates on them, which is another plus!

• You can choose a different provider each tax year, so it pays to be a "rate tart" and look around for the best deal before opening your next account.

• If your provider cuts its rates, you're free to transfer your accumulated pot to another provider. In all but a very few cases, you won't be charged a transfer fee.

Let me give you an example of just how valuable a cash mini-ISA can be. Let's say that you have a middle-ranking account which pays annual interest of, say, 3%. If you're a basic-rate taxpayer, this will be reduced to 2.4% after the taxman takes a fifth (20%) of your interest. If you're a higher-rate taxpayer, you earn a mere 1.8%, because the taxman grabs two-fifths (40%).

Hence, on a balance of £3,000, you would earn annual interest of £72 or £54. However, let's now transfer this pot to a market-beating cash mini-ISA paying, say, 5%. By a happy coincidence, you'll find this Best Buy account in the Fool's Cash Mini-ISA centre! With no tax to pay and a much higher rate of interest, this account pays annual interest of £150. This more than doubles the return for our basic-rate taxpayer, and almost triples it for our higher-rate taxpayers.

Job done! Now let's look at our second option:

2. Find a tip-top no-notice account

There's no point locking away your money in a notice account in a vain attempt to earn a higher rate of interest. Why bother tying up your money for, say, 120 days, when you can earn superior rates in a Best Buy no-notice account? You'd have to be bonkers to opt for a lower rate with financial handcuffs attached!

For example, here are three picks from the top-paying no-notice accounts (data checked with Moneyfacts):

• ICICI Bank's HiSAVE account pays a gross annual rate of 5.15% on £1+, with no strings attached. This is the best rate around for a no-nonsense, no-notice account; no other account can touch it.

• If you're particularly flush and can lay your hands on £15,000, Cahoot pays a gross rate of 5.25% (4.93% AER), which includes introductory bonuses.

• Finally, the seriously well-off can earn a one-year fixed rate of 5.10% AER with Citibank.

Here's the third of my trio of tips:

3. Earn jumbo rates by savings regularly

This is the shortest of the three: Earn 10% On Your Savings shows you how to earn ultra-high rates on monthly savings. Wow!

I hope that this article helps you to become a smarter saver!

More: Check out the Best Buys and great rates in our Cash Mini-ISA and Savings centres!