ISA rates climb to 11-month high
The run-up to the end of the tax year is seeing Individual Savings Accounts providers launch attractive high-interest products, allowing cash savers to make the most of a larger allowance from April.
From the 6th of the month, a maximum of £5,340 can be put into a cash ISA - up from £5,100 for the current tax year, following the coalition government’s announcement in the Emergency Budget.
But despite the Bank Rate still being stuck at its historical low of 0.50%, the average top five cash ISA rates are 11% higher than January last year – standing at 2.83%, according to moneysupermarket.
The new tax year is partly behind the better rates but, keen to encourage savers to take them up, providers are sweetening them with ‘guarantees’ – where interest is paid from the date the account is opened, rather than when funds transfer.
So while the typically 15-day process to switch an ISA still applies at most providers, newcomers to Halifax, Lloyds or Bank of Scotland ISAs earn interest from the day their transfer application is accepted.
Skipton Building Society was also highlighted, but for savers who want to transfer a significant sum for the new tax year, as its ‘Super ISA’ currently pays 3.10% on balances of £50,000 or more.
“The rates being offered on new cash ISAs are comparable with standard rates available on regular savings accounts but consumers get the additional benefit of not having to pay income tax on the interest earned,” said money supermarket’s head of banking Kevin Mountford.
“[But] if you have had an ISA for more than twelve months, the chances are you will be on a much lower rate of interest so it would be beneficial to switch."