Which ISA is best for you?

With savings accounts paying dismal interest rates in a stagnant economy, choosing the right place to invest your nest egg can be crucial. Every bank and building society seems to offer a bewildering range of ISAs but it's necessary to sift through the terms and conditions to decide which ISA is best for you<.

The first thing to decide is whether to invest in a cash ISA or a stocks and shares ISA. You can put up to £5,340 in a cash ISA or £10,680 into stocks and shares. A quick glance at the FTSE suggests that shares investments have not been healthy for a few years, but the optimistic can find a few shreds of evidence to suggest that this will change.

With cash ISAs, the obvious rule is to find the best return on your investment. Interest rates fluctuate constantly so keep abreast of the latest deals on comparison websites like moneysupermarket.com and thisismoney.co.uk.

Beware the common practice of initially attractive interest rates that quickly revert to poor rates of return after the first year. Be prepared to move your money around to chase the best returns.

With a stocks and shares ISA, it's important to look out for the charges incurred by your fund. Even if the FTSE starts to climb, you don't want to see your profits swallowed up by high annual charges. A independent financial adviser might be able to guide you on this, but may also charge for their services.

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