As the level of inflation stays high, savers are taking a pasting - with money losing its value fast in banks and building society savings accounts.
Figures from finance website moneysupermarket.com show the average of the top five easy access savings accounts rates is 2.76% - almost unchanged since March, with AA Internet Extra topping the list at 2.80%.
Two years ago, the average of the top five easy access savings accounts was 6.50%, so anyone relying on savings to partly fund their lifestyle has seen income slashed while prices rise.
Higher rate taxpayers, says moneysupermarket.com, need a savings rate of 5.17% to keep abreast of inflation.
Anybody on the new 50% tax band requires a rate of 6.21% to keep up - more than three times what many banks and buildings societies now offer.
No wonder savers were outraged when National Savings and Investments (NS&I) scrapped its index-linked certificates.
Against this background, the September issue of Which? Money magazine analyses an alternative option for many savers, including many choosing tax-free ISAs for 2010/11: corporate bonds, either individually or in funds run by managers.
Which Money? says: "With interest rates at historic lows, investors have flocked to bonds."
"In 2009 a staggering £9.89 billion was invested in bond funds and with a fixed rate of interest over a set period, you can calculate how much income you'll receive over time."
Corporate bonds, issued by companies to raise money, offer higher returns than cash with greater risks - they fall, as well as rise, in value and as BP proved earlier this summer, falls are steep when companies hit trouble.
But corporate bonds usually pay income at the stated interest rate and return your money in full on maturity.
Until this year, it was difficult for small savers to invest in individual corporate bonds unless they had around £50,000 to play with, or a stockbroker fixed it for them.
But on February 1, the London Stock Exchange (LSE) launched its new electronic order book for retail bonds "in response to strong private investor demand".
Corporate bonds from 10 major firms started trading that day including Tesco, BT, National Grid, GlaxoSmithKline, Morgan Stanley, GE Capital, Enterprise Inns and a new bond specially issued by Royal Bank of Scotland (RBS).
The platform has grown to include 24 corporate bonds, including cash-rich Vodafone. Investors can trade through one of 11 LSE-approved brokers, with a flat commission of 90p on top of brokers' fees.
The Which? Money survey found that stockbroker fees range from £5.95 to £40 a trade, with execution-only stockbrokers also willing to help.
Some bonds rise in price because of strong demand. Investors Chronicle magazine says a Provident Financial bond launched in March, promising 7% per year until 2020, went down so well that it has risen to 108p, shrinking the yield to 6% for new buyers.
Lloyds Banking Group's 5.375% bond launched in June, running until September 2015, is in demand too. Its rising price has cut the yield to 4.2%.
Other investors like the idea of backing a top retailer. A John Lewis bond maturing in January 2012 pays 6.375%, while British American Tobacco (BAT) promises 6.375% until December 2019.
Most investors, however, invest in corporate bonds through managed funds - it cuts the risk and leaves the selection process to experts.
Invesco Perpetual Monthly Income Plus emerges as best performer over 10 years in the Which? Money league table, turning £1,000 invested into £1,931, followed by Artemis High Income (£1,923) and Marks & Spencer High Income (£1,761).
Brian Dennehy, who specialising in corporate bonds at financial advisor Dennehy Weller, says: "Some funds produced amazing returns of 60%-plus in the year to March 2010 which is remarkable in a low volatility asset class."
"Since the lows of March 2009, Henderson (New Star) Sterling Bond and Old Mutual Corporate Bond are up 69% and 66% respectively."
"In contrast, more conservatively managed funds were relative laggards, like Fidelity Moneybuilder Income up 24% and M&G Corporate Bond up 21%."
"These are now the funds you should emphasise in portfolios, not for their income nor growth potential, but rather for capital preservation potential."
Dennehy thinks an annual yield of 4.5-5% per year is more realistic from corporate bond funds now plus, perhaps, another 1% or so for capital growth.
Bond yields are bound to fall, he says, reflecting falling yields on Government gilts.
He says: "For small investors, capital preservation is becoming the priority until we have greater clarity on economic prospects. Now is the time to back bond funds with focus on capital preservation, rather than those which have taken on more risks."
Ben Yearsley at financial advisor Hargreaves Lansdown takes a similar line.
"Dramatic gains by corporate bonds since the end of 2008 are unlikely to be repeated in the next few years", he says.
"However, yields remain high with 5% to 6% still easily achievable, though this will fluctuate."
Patrick Connolly, at financial advisor AWD Chase de Vere, says: "Our clients typically hold about 25% of their portfolio in corporate bond funds; the exact proportion varies, depending on circumstances and risk profile, from as low as 10% to as high as 60%".
Funds recommended by AWD Chase de Vere include Fidelity Moneybuilder Income, M&G Corporate Bond, Invesco Perpetual Corporate Bond and Fidelity Strategic Bond.
At Killik & Co, there is strong support for the £1.1 billion L&G Dynamic Bond Trust, paying four dividends a year for a total yield of 5.3%, even though it suffered in May because of the crisis in Greece.
Killik & Co also backs the £2.2 billion M&G Strategic Corporate Bond Fund. It too pays out four times a year, for a total 4.2% yield.
:: Information: Dennehy Weller 020 8467 1666 and enquiries@dwcifa; Killik & Co 020 7337 0520 and www.killik.co.uk; AWD Chase de Vere 0845 140 4014 and www.chasedevere.co.uk; Hargreaves Lansdown 0117 900 9000 and www.h-l.co.uk.
Poundnotes
:: Parents will spend an average of £122 to kit each of their children out for the new school year, claims a survey by insurance and investment group LV=.
They spend £139 for secondary school aged children and £96 for infants, while parents living in London spend an average of £158.
The survey estimates that parents splash out a total of £201,000 on raising a child from birth to 21, which is £9,610 a year or £26 per day. Education is reckoned to cost nearly £53,000 per child - and that is for those who don't pay school fees.
:: Four million British women are so fashion crazy they have racked up unsecured debts of £13 billion, says research from comparison site uSwitch.com.
The survey claims female shopaholics spend an average of £2,436 a year, or 51% of disposable income on clothes, accessories and grooming.
Half of female shoppers use a combination of credit cards, store cards, overdrafts or loans to fund their shopping sprees. They are making a significant contribution to the total UK personal debt, which has ballooned to a stunning £1.5 trillion.
:: Car accessories retailer Halfords has linked up with Provisional Marmalade to offer car insurance which allows provisional drivers to purchase fully comprehensive cover on a family member or friend's car for only £3 per day.
On a traditional policy, premiums to add an L-plate driver can be staggeringly high - often in excess of £3000. Car owners also put their no claims discount at risk if the learner is responsible for a collision.
Some insurers have raised the minimum age of named drivers to 21 or 25, preventing provisional drivers from being added to their parents' policy.
The new policy, written in the name of the learner driver, costs £90.95 to £99.50 per month and can be paid for by the learner. As a separate policy, it does not affect any existing insurance on the car.
The high cost of insurance has deterred so many young drivers that the number of 17 to 21-year-olds with a provisional licence has fallen by almost a third (from 46% to 32%) since 1995. An estimated 300,000, one in four provisional licence holders, are driving uninsured.
Halfords spokeswoman Diane Perry says: "The Driving Standards Agency recommends over 20 hours of private practice alongside professional tuition and this insurance policy removes a big concern facing parents helping their children - the risk to their no claims bonus."
Cover is available at www.halfordslearners.co.uk and packets of L-plates on sale in Halfords stores will carry details of the scheme.
:: There were nearly 20,000 repossessions in the first half of 2010, and the cost to the Government of each one was around £16,000, says Helen Newton of the Money Advice Trust.
The figure is down on the same period in 2009 and that, says Newton, is largely down to continued hard work and cooperation between Government, money advice agencies and lenders.
Anyone with debt worries should contact the National Debtline on 0808 808 4000.
