If RPI rose to 4.7%, which is likely if the government’s favour- ed consumer prices index rises 3.7%, you would earn 5.4% — 9% for a higher-rate payer.

3 INSURANCE BONDS

If you want to spread your financial wings a little further, cash funds from insurers can offer returns equivalent to 8.125% for higher-rate taxpayers.

The funds invest in “money-market” instruments — like cash deposit accounts but for institutions rather than individuals. When you invest in such a fund through an insurance-bond wrapper, there are generous tax breaks, according to HFM Columbus, a wealth manager.

It suggests the American International Group (AIG) Premier Bond, which invests in certificates of deposit from institutions rated AAA or AA (the strongest available).

The bond is yielding 6.5% but only basic-rate tax is deducted at source. Higher-rate taxpayers can take an income of 5% a year with no tax to pay until the bond is cashed in. You can avoid the tax altogether at encashment if you take out a 10-year savings plan, which will be completely free from the top rate at maturity. This means the bond is yielding the equivalent of 8.125% for a higher-rate taxpayer.

If the bond defaulted, you would get 100% of the first £2,000 invested back, plus 90% of the remaining investment, with no upper limit.

4 INSURANCE POLICIES

Colin Jackson at Baronworth, an adviser, is keen on a novel type of product which invests in US insurance contracts and yields 8.25% over five years, 8.5% over seven, and 8.75% over 10 years.

The Keydata Defined Income Plan holds a combination of cash and investments in “keyman” insurance contracts in America. These are life-insurance contracts taken out by companies to cover themselves if a senior employee should die. Jackson said: “In America, if the person leaves the company, then you can sell that policy on. You can buy second-hand keyman contracts and the buyer gets a windfall when the worker eventually dies.”

One of the risks is that the person lives longer than the actuaries had assumed. You can hold the fund in an Isa to make it more tax efficient, Jackson said.

5 HIGH YIELD BOND FUNDS