Savers: use your Isa

To have any chance of keeping up with inflation, you need to protect as much money as you can from the taxman. The easiest way to do that is with a cash ISA, says Ruth Jackson.

High inflation and falling interest rates make it harder than ever to get a decent return on your savings. The consumer price index is currently 3.2%, while the average interest rate on a regular savings bank account is 2%, according to Moneyfacts.co.uk. And that's before tax: the government takes 20% of that 2% (or 40% if you're a higher-rate taxpayer).

So to have any chance of keeping up with inflation, you need to protect as much money as you can from the taxman. The easiest way to do that is with a cash individual savings account (Isa), so it's no surprise that as Isas reach their tenth birthday, they're more popular than ever. A total of 14.7 million new accounts were opened in 2007-2008, compared to 9.3 million in the year they were introduced.

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Ruth Jackson-Kirby

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping, among many other titles both online and offline.