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Playing it safe

The stock market is up and down like a yo-yo and inflation is knocking on the door of 5 percent. So what should savers do to get decent returns without it being nabbed by the taxman?

National Savings and Investments index-linked savings certificates could be the answer, delivering better returns than any building society or high street bank account. Savers are able to invest up to £15,000 in these certificates, the return will be roughly equal to RPI (currently 5 percent) plus a further 0.5 percent over the five-year term. As a result, a total of £6.5bn has been invested in just two months after NS & I reissued the savings plans earlier this year.

Danny Cox, the head of advice at Hargreaves Lansdown, claimed: 'Even some of the best performing funds such as Artemis Income have only delivered returns of 5.9 percent a year - and investors have had to take a lot more risk with their money.'

'In some cases, people have up to £500,000 sheltered in these savings plans. This is particularly useful for those nearing retirement who need to preserve capital but want to ensure it retains its spending power,' he continued.

But investors shouldn't assume that a return of 5.5 percent will be received straight from the off. What you get back will be based on the difference between what prices are now and in five years time. If inflation slows, which it is predicted to, then so will returns, though at least what you invest will maintain its purchasing power.

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