How to progress your monthly income

Pensioners who depend on monthly income from their savings have suffered a punishing year.

Interest rates on easy access savings accounts have been averaging less than 0.2 per cent before tax and are likely to stay there for several more months.

But you can earn monthly income of more than 2.4 per cent after tax (3 per cent before) on top-paying accounts. Coventry Building Society"s 1st Class postal account pays 2.48 per cent (3.11 per cent), including a bonus paid for the first year.

Struggle: Pensioners who rely on income from their savings are having a tough time due to the low base rate and poor returns

Even with these top rates, you will receive only around 20 a monthincome after tax (25 before) for every 10,000 you have in savings.

You can boost your savings by going for a fixed-rate deal - aslong as you are willing to tie your money up for one, two or threeyears. And there is a further boost for cash Isa savers. A growingnumber of banks and building societies are coming out with fixed-rateIsas which pay interest monthly, rather than just once a year.

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Skipton has a new three-year fixed rate cash Isa paying 3.75 per cent a year - or 3.65 per cent to monthly income seekers. The rate is slightly lower because you are not benefiting from having your interested compounded up.

Nationwide also pays them 3.65 per cent fixed for three years on its current cash Isa deal or 3.9 pc to those age 50 and older.

You can transfer your current cash Isa to both the Skipton andNationwide accounts. With Skipton you must have built up at least15,000, but with Nationwide the minimum is just 1. If you want to tieyour money up for a shorter two-year term, Saga, part of Halifax, pays3.45 per cent to monthly income seekers.

Search for the best savings rates at thisismoney.co.uk

On easy access cash Isas, the top monthly interest deal comes from Standard Life Bank, now part of Barclays, at 2.61 per cent on a minimum 1. If you are willing to run your account over the internet, then NatWest"s E-Isa pays 2.47 per cent on savings of 30,000 or more.

Banks and building societies regularly pay less on their cashIsas than on their taxable accounts. Nationwide pays monthly income of3.4 per cent tax free on its two-year fixed rate cash Isa, but 3.8 per cent before tax on its taxable bond.

Some banks still don"t allow you to take monthly interest fromyour fixed rate Isa. Halifax, one of the largest Isa providers, pays3.75 per cent a year for three years in its fixed rate Isa but higher 4.25 per cent before tax in its taxable version. And cash Isa savers are not given the option to take interest monthly rather than annually.

sy.morris@dailymail.co.uk