Other ways of saving money

• ISAs

ISAs offer a way to save money (normally a certain amount per annum) while avoiding income or capital gains taxes.

An ISA offers up to three options, or components, for investing. Gilts or corporate bonds, as well as stocks and shares may be selected as part of the ISA. Earnings from an ISA are currently tax-exempt.

ISAs were introduced to the market in 1999, replacing TESSAs & PEPs.

• Savings Bonds

This may be considered as a kind of savings account, however since your investment is locked for a particular length of time, savings bonds generally offer more competitive rates than basic savings accounts.

Penalties are often applied to withdrawals, should the particular savings bond have provisions for it.

In general, savings bonds are best suited to investors looking for a low-risk product that offers good interest rates in exchange for limited access to their funds until the bond matures.

Investments are usually at least £1,000 and come with a fixed rate of interest. There is a requirement that the holder be at least sixteen years of age, otherwise the bonds may be held on their behalf by a person who meets the age minimum.