In the coming weeks all those that had their savings invested in the failed Icelandic bank Icesave will be expecting their money back as part of the compensation scheme set up by the Financial Services Compensation Scheme (FSCS).

This brings with it the question as to where you should look to invest to enable you to get back in the interest game while ensuring your money is safe.

If you have over £2000 to invest and are looking to get the best returns on your money, the highest rates currently available are on savings accounts. There are still a number of providers offering rates of 6%, with the market leading Alliance & Leicester esaver account offering 6.30%. Although these rates have fallen over the last few weeks, they are still very impressive considering the bank rate is currently at just 3%, but these rates could fall further, especially as the bank rate is expected to continue falling, so act fast if you want to take advantage!

If you have £2000 or under, you would be better to keep your money in a current account, as these accounts are offering rates in excess of 8% for up to £2000. Alliance & Leicester are currently offering the market leading deal, paying a massive rate of 8.50% on their Premier Direct Current Account.

The problem with savings accounts is that the rates currently offered could fall without notice, and with the recent fall in Bank rate with further cuts expected, you may find you you would do better to put your money into a fixed rate account. This will effectively freeze the rate for the period you agree to, meaning that the rate will not be affected by future interest rate cuts.

ICICI currently offers the highest rates on fixed term bonds, with its 1 year HiSave fixed rate account paying 5.75% on balances over £1000. As the rate is fixed, this account provides the best returns on money that is left to mature without being withdrawn within the year. However, if you wish to make withdrawals, the rate is dropped to 5.40%, which is still a very competitive rate.

Chancellor Alistair Darling has said that people affected by the collapse of Icesave will be able to maintain the tax-free status of their Isas. Normally this would not be the case, as it was previously stated that the tax-break is lost if an account is closed. However, the treasury has confirmed  that this will only apply if the money transferred to another Isa before April 5 2009.

If you still have this year's Isa allowance and are expecting your Icesave savings to be returned, consider investing up to £3,600. This will allow you to earn tax free interest on your investment. Alliance & Leicester currently have an Isa account offering a rate of 5.50%.

If you would prefer to have access to your savings you may want to consider a standard easy access account. You will find offers online generally offer higher rates of interest to those available over the phone or through a branch as that overheads are lower.

It is important to remember that you should only invest up to £50,000 spread across any one institution. This is because the FSCS compensate accounts up to this amount per institution (unless brands within the same institution hold multiple FSA registrations) so if a bank were to collapse you will be covered. It is also worth aiming lower than the limit, as any interest you accumulate will be counted along with your investment, so if your interest earnings push your savings over the limit, you will lose out. For a full list of which banks fall under the same institution, and which ones hold individual FSA registrations, see our List of banks by institution.

The only exception to this is if you invest it with National Savings & Investments or Northern Rock. These are both Government-backed, so they guarantee to protect all money held in their accounts. Northern Rock cut back on its accounts last month to control demand due to an agreement they made when they became nationalised, but it has just commenced business to new savers. Its E-Saver account is now paying a rate of 5.15%.

Many savers that experienced problems with Icesave may now feel anxious about where to invest, with plans to avoid any banks that are not based in the UK. This may not be the right approach, as the government have now proved that they are capable of ensuring no saver will lose out, with those now being compensated as the proof.

Check out our savings comparison page for an easy to use list of accounts and brands to find the right account for you.

Published by Sam Gooch