Monday, 18 February 2013

The Telegraph - Isa watch: The best rates - and the catches

The Isa rush should be about to start, when banks offer the best deals ahead of the April tax deadline. We highlight the best rates - and the catches.

Savers have until April 5 to deposit £5,640 into a cash Isa (individual savings account). Unlike conventional savings accounts, interest is paid gross, without 20pc tax being deducted.
Historically, savers rush to use, or lose, their allowance and this stampede spurs banks and building societies to up their game and offer better deals. So it may be wise to hold back from grabbing for the first attractive-looking rate.
These better rates also tend to remain for the new tax-year.
However, everything is different this year. The government-backed Funding for Lending Scheme (FLS) has handed cheap money to banks and building socities to lend out. That means they have less need for deposits from savers, and have therefore reduced the rates on offer.
But experts are suggesting that that this may be all about to change. This week, Halifax has lauched a new range of Isa products which may act as a kickstart to the Isa season.
What you can rely on is that we will track the best deals and publish our views on each - and the catches. We'll do that here, so don't forget to bookmark and return to this page. We'll also alert readers to new deals on Twitter: @moneytelegraph

The best for instant access

Cheshire Building Society’s ISA Saver (Issue 1) is paying 2.5pc on balances over £1,000.
Transfers in are allowed for those who are sitting on old Isas paying worse rates, as are unlimited withdrawals and deposits up to your annual cash Isa allowance.
The good news is that the fixed bonus of 2pc will protect the rate from falling below this level before the end of the bonus term (July 31, 2014), which is longer than the usual 12 months. But it’s vital to make a diary note to switch it when the bonus ends.
To find out more visit thecheshire.co.uk or call 0845 755 0555
The catch:
Cheshire Building Society is part of the Nationwide group so make sure you’ve not got more than £85,000 in total with the group (Nationwide Building Society, Cheshire Building Society and Derbyshire Building Society) to meet savings compensation rules. Read the FSCS rules on compensation and its list of cross-ownerhsip - fsa.gov.uk.

The best for regular savings

Buckinghamshire Building Society’s Chiltern Gold Nuggets Regular Saver Cash ISA (Issue 2) pays a competitive 3pc.
With this tax-free savings account, the monthly payment must stay the same for the whole tax year, between £10 and £470, but can be altered in April each year. There is no maturity date and one penalty-free withdrawal per tax year is allowed.
Available for operation in branch or by post only.
Find out more bucksbs.co.uk or call 01494 879500.
The catch:
This rate is clearly more competitive than any of the other Isas, for anyone who only has the ability to save on a regular basis. However, as you can only hold one cash Isa per tax year if you have a lump sum you’ll earn more interest by putting the whole lump sum into one of the other best buy Isas for the full period.
Plus, should savers exceed the one withdrawal per year or a monthly payment is missed, the rate on the balance will drop to 0.1pc

The best notice Isa

Coventry Building Society’s 60-day Notice ISA (3) pays 2.8pc tax-free. Requiring an opening balance of just £1, this account allows penalty-free withdrawals with just 60 days’ notice. Interest will be paid on the anniversary of the account opening.
Account can be operated online, over the telephone, in branch or by post.
“Coventry Building Society has offered a competitive issue of this Isa since the last tax year, for those who are happy to give notice on their Isa cash,” said Susan Hannums, spokesman at SavingsChampion.co.uk.
“The current offering of 2.80pc is one of only a small handful of savings accounts that are actually earning more than the current rate of inflation.”
For additional information, visit coventrybuildingsociety.co.uk or call 0845 766 5522.
The catch:
This account has a variable rate from January 1, 2014 and includes a bonus of 0.6pc for the first year, so savers must stay vigilant. Transfers in are not allowed.

The best fixed-rate Isas

For those savers who want guaranteed returns from their savings, a fixed rate account may be the best option.
The best one-year Isa
The best one-year fixed-rate deal comes from Nationwide Building Society and pays 2.05pc. This account can be opened with a minimum balance of £1, but is can only be operated in branch.
For more information visit nationwide.co.uk or ask in branch.
The catch:
Part withdrawals are not allowed. Early closure will result in a loss of interest. If there is insufficient earned interest, then the amount of the early access charge will be taken from the funds in the account.
You can make just one lump sum payment by paying in cash or a cheque at any Nationwide branch. However, once open, you will not be able to pay in additional funds.
The best two-year Isa
For those savers who are happy to lock their money in for longer, Halifax is now offering a two-year fixed-rate cash Isa that pays 2.5pc.
The account can be opened with a minimum balance of £500 and transfers in from other accounts are allowed. This account can be operated in branch, online or over the telephone.
For more information visit halifax.co.uk.
The catch:
No withdrawals allowed. Early closure allowed with 180 days loss of interest. You may therefore get back less than originally deposited.
The best five-year Isa
If you are looking for a longer fixed-rate deal, Halifax’s Isa Saver Fixed pays 2.7pc for five years.
Available for those with a minimum deposit of £500, this account can be operated online, in branch or over the telephone.
To find out more visit halifax.co.uk or call 08457 26 36 46.
The catch:
No withdrawals allowed. Early closure or transfers out are permitted, however, this will incur a charge equal to 365 days loss of interest. This amount will be taken from the amount deposited into the account, and as it is a fixed saver, you may get back less than you deposited.
Our guide to the best cash Isa rates will be updated as the rates change so bookmark this page.

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