Cash

Most people have savings in bank or building society accounts that pay regular interest and give them fairly easy access to their money. There are advantages and disadvantages to this type of account.

Advantages

Your savings are very secure
You can get your money back quickly and easily
Interest will always be paid

Disadvantages

Interest rates are variable
The best rates may only be available on special terms or for large amounts
With some accounts you may be penalised if you don't give notice of withdrawals

Cash accounts are the safest form of investment. They’re a good place for money you may need in the short term, but over the longer term they offer lower potential for growth than equities, bonds or property.

Additionally, your money could be eroded by the effects of inflation and taxation. For example, if your account pays 5% but inflation is running at 2%, you are only making 3% in real terms. If your savings are taxed, that real return of 3% will be reduced even further.

Cash funds

Cash funds use the pooled savings of many investors in order to benefit from higher interest rates that are not usually available to individual investors.

Under current legislation, you can invest in a cash fund as part of your annual ISA entitlement - up to a maximum of £3,600 each tax year.

Please note that unlike a deposit account, the value of the fund can go down as well as up. The value of tax savings and eligibility to invest in an ISA will depend on individual circumstances, and all tax rules may change in the future.

	Fidelity's cash funds