What are likely return from a cash account investment?

Don't expect much too much from a cash account. In return for the security, you'll do well to get around 3.5 to 5 per cent from a bank or building society. You may get a lot less. You should only invest in cash for safety, never for the long term unless it is of paramount importance that you know exactly what you will have in the future to meet a known financial need such as a child's education.

Since 1971, cash has only been the best performing asset type during two years - 1974 and 1990. And both years, the financial system was in trouble. Cash was the worst place to put your money during 10 separate years. And over almost any long period, cash has been easily out-gunned by bonds and property, and it's been beaten out of sight by shares. The building society or National Savings is the starting point for any calculation of whether a risk could be worthwhile. There's no point investing in a speculative enterprise if the best you can foresee is a fraction of a percentage point above the bank branch.

Leaving medium- to long-term money in a current bank account is a guaranteed loser. Rates can be as low as 0.1 per cent, and yes, that's before tax on this virtually invisible return at 20 per cent for most people and 40 per cent for the better off. Inflation means your money is worth less each year. The government inflation target is 2.5 per cent (though it currently stands at above 3 per cent), so your money needs to earn that much after tax to stay level.

For a basic-rate taxpayer, that means a headline rate of around 3.2 per cent when inflation is on target, and a top-rate taxpayer needs 4 per cent just to go nowhere. Shopping around and being prepared to accept restrictions on withdrawals should produce around 5-6 per cent. What happened to the 10 per cent rates on bank and building society accounts of a decade or so ago? They disappeared along with high inflation. A 10 per cent rate when prices are rising at 12 per cent equals a guaranteed annual loss - even before taxation. At least a 5.5 per cent savings account when inflation is 2.5 to 3 per cent offers the chance of slight gains.