Savers and investors seeking income are now spoiled for choice as interest rates soar, but it leaves them facing some tough decisions. Their main options include cash savings accounts, bond funds, annuities and dividend stocks.

All pay different rates of income, depending on the level of risk savers and investors are willing to tolerate.

It marks a massive reversal after years when income seekers struggled to generate any kind of yield. But which options are right for you?

Savings accounts. Cash is king again, with FirstSave’s two-year fixed-rate bond paying 6.15 percent a year and United Trust Bank’s five-year bond paying 5.76 percent a year all the way through to 2028.

Even easy access account look generous, with Shawbrook Bank leading the way with 4.35 percent. The Bank of England is expected to continue hiking interest rates which means returns on cash will climb even higher.

Anna Bowes, founder of rate tracking service Savings Champion, says new best buy accounts are being launched by the day and it's hard to keep up. "Although it's tempting to wait until the next market leader comes along, don't leave it too long."

The downside is that even the best accounts pay less than inflation. And if consumer price growth does slow towards the end of the year, as many expect, today’s savings rates could quickly slide.

Verdict: Risk-averse savers who want their money to work harder should advantage of today’s top fixed-rate deals while they last.

Bond funds. Funds investing in a spread of government and corporate bonds were a popular source of low-risk income before the financial crisis, but fell out of favour as interest rates collapsed.

Bond funds look a lot more attractive today, with two-year UK government gilts now yielding around 5.24 percent, and investors can get capital growth on top, too.

Gilts, short for gilt-edged securities, can give higher-rate 40 percent taxpayers a staggering total return of 8.6 percent a year, before tax.

Additional rate 45 percent taxpayers can get a blockbuster 9.4 percent gross from gilts. It’s a fantastic opportunity but may require financial advice.

It’s a lot easier to buy a fund investing in a spread of bonds, says Jason Hollands, managing director of Isa fund platform Bestinvest.

He suggests the Vanguard UK Government Bond Index, which currently yields 4.69 percent, while the iShares UK Gilts 5 Years UCITS ETF yields 5.33 percent.

TwentyFour Absolute Return Credit fund invests in corporate bonds, too, and yields 6.99 percent.

The income can be taken free of tax inside your £20,000 ISA allowance, and all capital gains are free of tax, too.

Verdict: Bonds are back and paying attractive levels of interest again but remember that your capital is exposed to some risk.

Lifetime annuities. The typical single 65-year-old with £100,000 of pension savings can now get a level of annuity income of £7,197 a year for life. Two years ago they got less than £5,000.

Annuities offer the security of a guaranteed income for life, the downside is that you hand over your capital. Many prefer the flexibility of drawdown, where you leave your pension funds invested, but the risk here is that you can run out of money.

READ MORE: This savings account pays 5.76% for five years - experts say buy shares instead

Demand for annuities is rising sharply as rates hit a 15-year high, says Nick Flynn, retirement income director at Canada Life. “Many still prefer drawdown, but you could mix and match. Annuities can be bought in tranches as you move through retirement, securing a better rate as you age.”

Verdict: Annuities offer the security of a guaranteed lifetime link for as long as you live, but lack the freedom and flexibility of drawdown.

Stocks and shares. FTSE 100 shares are another popular source of dividend income, and the index currently yields 3.99 percent a year. 

Investors should also enjoy capital growth when share prices start rising again, said Victoria Scholar, head of investment at Interactive Investor. "They need to be patient and there are no guarantees."

Companies aim to increase their dividends over time, which helps your income keep pace with inflation but your capital is at risk, says Laith Khalaf, head of investment analysis at AJ Bell.

Some stocks can offer sky-high yields, for example, Legal & General Group currently yields 8.76 percent a year.

That’s staggering rate of income and L&G has a strong balance sheet and plenty of capital strength, so this dividend looks safer than most. It's still notably riskier than cash, though.

Most investors spread the risk with an equity income fund that invests in a blend of different stocks. The popular City of London Investment Trust has a proud track record of increasing its dividend of the year for more than half a century. It currently yields 5.19 percent with an annual charge of just 0.33 percent.

Verdict: Shares will always be volatile so only buy with a minimum five-year view, and ideally 10 years or more.

Perhaps the most sensible thing to do is to spread your money across all four asset classes, according to your attitude to risk. Consider financial advice.