Four Solid Savings Accounts

Donna Werbner looks at some of the best savings accounts currently on offer.

This article was first sent to Fools as an email in our 'The Good, The Bad and The Ugly' series.

Bank failures. Government bail-outs. And now a recession looming. There's no doubt about it: October 2008 has been a month of unprecedented economic anxiety, particularly for Foolish savers.

So perhaps it's not surprising that the old priorities for an instant access savings account - such as a competitive rate of interest and transparent, penalty-free access - appear to have gone out the window.

Instead, savers are understandably prioritising safety, first and foremost. Rate-chasing is dying out to the extent that it almost seems to belong to a happier, by-gone era - another victim of this fire-breathing, never-ending credit crunch.

But even if you think it's too dangerous right now to be a rate tart, you can still be rate smart. In other words, you can prioritise safety without sacrificing all your well-learned, well-earned Foolish principles.

Here's an in-depth look at what I think are four good all-round instant access accounts, that offer both a decent return and a safe haven for your savings.

Great for rate

At 6.6% AER, the Alliance & Leicester eSaver Issue 2 offers the market-leading rate at the moment. And, as Alliance & Leicester is now owned by Spanish bank Santander (one of the biggest banks in the world), it is a very safe account.

But this account does have a serious flaw: no interest is earned on any month in which a withdrawal is made (except in July, when withdrawals are allowed without loss of interest). The inaccessibility of this account means it only pays a market-leading rate if you are prepared to keep your money locked up until July.

Safety first

HSBC is one of the safest places to stash your cash.  Because it is the best capitalised bank in the UK, it had no need to call on the Government for any of the £50bn bailout. And as one of the world's largest banks, its credit default swap rating is extremely low. (Read Find Out How Safe Your Bank Is for more on why low credit default swap ratings indicate that a bank is safe).

Unfortunately, HSBC's Online Bonus Saver does not offer a very competitive rate, at just 4.75% AER - and that's if you don't make any withdrawals. If you do, the rate drops to just 2.25% AER. Considering inflation has reached 5.2%, this means your money is actually falling in value if you invest in this account. That's the price HSBC expects you to pay, sadly, for the security blanket of its increasingly powerful brand.

True Instant Access

Neither of the accounts I have mentioned so far have been true instant access, which I define as an account that allows you to make instant withdrawals without charging you any sort of penalty. If this is your top priority, you may want to consider the Intelligent Finance isaver.

The AER on this account will stay exactly the same, no matter how many withdrawals you make.

At 6.4% AER, the isaver is only 0.2% behind Alliance & Leicester's market-leading eSaver. To put this in perspective, a basic rate taxpayer would lose just £1.60 a year in interest on a £1,000 of savings by opting for the isaver over the eSaver.

In terms of safety, Intelligent Finance is part of HBOS, which has suffered heavily from the recent banking crisis and is due to be merged shortly with Lloyds TSB. If this merger doesn't go ahead, HBOS will be in trouble. Then again, the Government has clearly shown it would not allow HBOS to fail. And you do have £50,000 of protection through the Financial Services Compensation Scheme.

So in my opinion, this account is pretty safe - although admittedly, it is the riskiest account I have mentioned so far.

If you're looking for more safety, another option is the ING Direct Saving Account which pays 6% AER. The rate isn't as high as the Intelligent Finance isaver, but ING is deemed to be slightly safer than HBOS (again, see this table for details) and there are no penalties whatsoever for withdrawals on this account.

Compare savings accounts at Fool.co.uk