Savers could boost their nest-egg by £111 a year by switching to a better Isa
Savers could boost their nest-egg by £111 a year by switching to a better Isa.
The gap between the best and worst cash Isa accounts has widened in recent months as banks and building societies launch new offerings.
The top rate on an easy-access Isa is now 1.21 per cent, compared to less than 1 per cent a year ago.
But big banks have yet to boost rates and still pay as little as 0.1 per cent to some Isa savers.
So, if you stay loyal, you could miss out on up to £111 of tax-free interest a year on a £10,000 savings pot.
Fixed rates have risen even faster, from 1.05 per cent a year ago on a one-year deal to 1.46 per cent now.
Last week, Nationwide launched its Loyalty Single Access Isa paying 1.4 per cent.
But you can only make one withdrawal a year. Make any more and the rate drops to 0.5 per cent for the remainder of the year.
The account is available to customers who have been a member of the building society for at least one year.
Nationwide pays 1.3 per cent on its Single Access Isa for those who can’t open the loyalty account.
On easy-access accounts, Ford Money has raised its rate to 1.11 per cent, and Virgin Money to 1.21 per cent, both on the High Street and online.
Neither has any withdrawal restrictions. The best one-year fixed-rate cash Isa comes from Charter Savings Bank at 1.46 per cent or, in the High Street, 1.3 per cent with Virgin Money.
Experts say that rates have been boosted since a Bank of England scheme, which gave banks and building societies a cheap source of money, ended last month.
Charlotte Nelson, finance expert at data analysts Moneyfacts, says: ‘Providers have started to look at how they will replace that vital form of funding. The knock-on effect is more competition for cash Isa money.’
Why it’s time to raise interest rates
In this excerpt from the This is Money podcast, Simon Lambert outlines why he thinks interest rates should rise and Rachel Rickard Straus explains why savers need to switch to better deals and not just rely on rates going up.
Just one in ten savers has switched their cash Isa in the past three years, according to City watchdog the Financial Conduct Authority. Four out of ten savers have not switched for more than five years.
Experts say this is because many savers feel loyal to their existing bank and think that there isn’t much difference between providers.
Others are reluctant to deposit their money with lesser-known names.
Yet your cash is as safe with smaller providers as with the big banks. Up to £85,000 is covered by the Financial Services Compensation Scheme.
If you have cash in Isa accounts from previous tax years, opened before April 6, 2017, you can spread this old Isa money around as many providers as you wish and still earn tax-free interest.
This means you could deposit some in an easy-access Isa, some in Nationwide’s new deal and some into a fixed-rate deal that ties up your money for a year or more.
But any money deposited into a cash Isa in this current tax year must all be with one provider.
To switch your cash Isa, ask your new provider to arrange it for you. Banks aim to carry out 80 per cent of switches within seven working days.
The latest industry figures show that 88 per cent of switches go through in this timeframe.
You can put between £1 and £20,000 in an Isa this tax year, which ends on April 5.
THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS