Nreves jangled when Standard Life Investments (SLI) announced it was increasing its exposure to cash.

SLI is a subsidiary of the Edinburgh-based assurance giant Standard Life which was established three years ago and looks after more than £80 billion of our savings and pensions.

When financial experts paid to look after our money announce they are moving assets significantly into cash, it is obvious the investment market is fragile.

But why pay experts handsomely to earn higher returns than we can find for ourselves in some humdrum deposit account?

The explanation from SLI's global investment strategist Ken Forman is the company needs to be in a flexible position to move back into equity markets in the second half of the year when share prices hit rock bottom.

That particular recovery, of course, could be delayed by events in the Middle East.

What's good for SLI, however, is already more than a passing thought to tens of thousands of individual investors.

With equity prices down by about 30 per cent since the end of 1999, it is hardly surprising the latest figures from the building societies showed net monthly inflows of about £870 million, getting on for three times the figure of a year ago.

Simultaneously, investment in equity-linked products, including unit trusts, equity individual savings accounts (ISAs) and even with-profit bonds, has been in sharp decline.

"Cash is king," says Colin Jackson, of Baronworth Investment Services.

"If our clients over 50 lose capital on an unfortunate investment, it is highly unlikely they will ever be able to replace it. We had a cheque from one client for £200,000 this week to go straight into a guaranteed income bond."

Even canny investors who enjoyed a good run in shares in the Eighties and Nineties may need to shift a chunk of their portfolio into cash.

According to Warren Perry, of independent financial advisors Whitechurch Securities, a sound defensive portfolio in current markets would be about 20 per cent in shares, 35 per cent in cash and 45 per cent in the middle ground of bonds, with-profit and property.

Major lenders are launching products to calm nervy savers.

Northern Rock pays 4.5 per cent gross on a fixed-rate bond from £500 upwards, maturing in October 2004.

Kent Reliance pays 4.75 per cent over three years on £100-

plus.

A two-year, fixed-rate bond from Cheltenham & Gloucester (C&G) pays 4.4 per cent gross until November 30, 2004.

All these figures could look good if, as expected, the next move in interest rates is downwards.

The 12th issue of the quantum account from the Norwich & Peterborough Building Society, launching on October 1, looks positively mouthwatering with the headline interest figure of 6.5 per cent.

Sadly, this figure refers only to the final year of a five-year saving plan, on a minimum £1,000 investment, which earns four per cent until September 2003 and rises in subsequent years to hit 6.5 per cent in the year to September 2007.

The actual interest rate, over the full period of the plan, is about 4.85 per cent.

So what is the right place for cash in these uncertain times when the markets might hit a double dip, even without a Middle East war?

The answer, says Wayne Gibbs at the Brighton office of independent financial advisors Charcol, depends on the investor's risk profile, existing asset base and age.

Few of us, he says, have much spare cash anyway until our late 40s and, after 50, we tend to put it into safe investments to enhance monthly income.

Mr Gibbs said: "Most people prefer the low-risk approach to investment. In which case, even for people on basic rate tax, the most effective return on a cash lump sum comes from paying off part of the mortgage, providing it can be done without any financial penalty."

A basic rate taxpayer with a standard variable rate mortgage, costing about 5.5 per cent, gets an effective return of 7.05 per cent on money used to reduce the loan. A higher-rate taxpayer gets a return of 9.17 per cent, way above anything on offer in the current savings market.

If borrowers leave monthly repayments unchanged, the lump sum means they pay off their mortgage much faster.

Buyers with flexible mortgages find it particularly easy to pay spare cash into their account. Their interest bill reduces at once but the lump sum can be added to their outstanding loan if they need cash again in the future.

Another obvious home for cash is the mini-cash ISA, into which up to £3,000 each year can be invested with the interest paid free of tax. The best rates, about 4.5 per cent, are from Kent Reliance, C&G, Northern Rock and Skipton.

Finding the most effective place for a larger lump sum is usually a question for older people anticipating a fall in earned income as retirement looms.

The money may come from an inheritance, the sale of a large family house or cash-free lump sum upfront when a pension is drawn.

For these people the guaranteed income bond, issued by insurance companies and ignored for years as stock markets boomed, is suddenly the safest port in a storm.

It returns capital invested in full at the end of the set term, which ranges from one to five years, and income is certain from day one.

Three-year bonds offer a net-of-tax yield from about 3.8 per cent, equivalent to 4.4 per cent gross. On £30,000 invested for three years, Swiss Life pays 4.25 per cent net or 5.31 per cent gross.

Providers include AIG, Pinnacle (part of French Banque Paribas), Countrywide Assured, and newcomer Swiss Life.

There is one potential flaw in guaranteed income bonds.

Anybody who needs their money before maturity faces a penalty and could lose ten to 20 per cent of their original investment.