Cash accounts pull in 4 million investors

By far the most popular way to save tax free is a cash ISA account. This is a normal bank or building society savings account with a tax-free wrapper. Four million people have opened these ISAs while only 2 million have opted to buy shares through a stock market ISA.

The vast majority of banks and building societies, the leading providers of cash ISAs, have not announced what they will be paying their savers after the latest interest rate rises. New deposit rates are likely to be announced in the next few days and will come into effect after 1 December.

Government-approved CAT standard accounts have to stay within two points of the base lending rate, now 5.5 per cent. The CAT logo shows that the account meets fixed standards over costs, access and terms. These accounts are the simplest to run, without any hidden penalties in small print.

Don't raise your hopes that many providers will raise their interest rates on cash ISAs by the full 0.25 per cent rise in base rate that the Bank of England announced a couple of weeks ago.

"Under the CAT regulations we are given 28 days to announce the new ISA savings rates following any interest changes," says Gug Kyriacou of Abbey National. "But these will probably only go up between 0.1 and 0.2 per cent." The best CAT standard accounts pay almost as much as the non- standard ones.

The best-paying ISA now is from Newcastle Building Society, paying 7.15 per cent, but you cannot touch the money until November 2002. Nationwide pays 6.5 per cent and has a CAT mark.

n Contact: Newcastle BS, 0191-244 2442.