New ISAs for the new tax year
As of 6 April cash and equity ISA allowances have increased, giving you the chance to save or invest more money tax-free. The overall annual savings limit has now increased to £7,200, of which up to £3,600 can be kept in a cash ISA.
Already, several banks and building societies launched new ISAs. But although rates look good, many expect savers to invest the full £3,600 upfront and don’t allow transfers from previous ISAs.
Fixed rate ISAs
If you have the full £3,600 to deposit straight away then there are several attractive products on offer. Top of the list is from the Principality, which has launched a six-month ISA paying 6.6% AER.
This rate stands out from the rest of the crowd and unlike many providers Principality accepts transfers from previous ISAs.
Bradford & Bingley's new one-year fixed ISA priced at 6.25% AER is also only available for people who are willing to deposit the full £3,600 in one go. However, this account doesn't accept transfers.
Coventry Building Society is also offering an ISA that pays 6% AER until 31 May 2009 on deposits of £3,600. Transfers are not permitted.
If you have £3,000 to put into a new ISA, then Halifax offers a four-year account paying 6.2% AER. This account accepts transfers from previous tax years' cash ISA savings.
Or, you could opt for Julian Hodge Bank's ISA which is fixed at 6.15% AER for one-year.
For those with less to save, Skipton Building Society has launched a fixed rate cash ISA paying 6.26% AER until 5 April 2009. The account doesn’t accept transfers but has a minimum deposit of just £50.
Meanwhile, Nationwide pays 6.15% on its two-year fixed ISA on deposits of just £1.
|Fixed rate ISAs||AER||Notice or term||Deposit||Tranfers?|
|Bradford & Bingley||6.25%||One-year||£3,600||No|
|Julian Hodge Bank||6.15%||One-year||£3,000||Yes|
|Source: Moneyfacts 14/04/08|
Remember, fixed rate ISAs offer security of rate but do not always allow easy access.
Barclays Banks continues to offer its Tax Haven ISA paying 6.5% AER on deposits from £1. The rate includes a bonus rate of 1% for 12 months and transfers are not permitted. However, the account offers instant access and withdrawals from £10.
A new ISA for the new tax year is from National Counties Building Society. Its instant ISA pays 6.26% AER on deposits from £1, accepts transfers and also offers an interest rate guarantee of at least 0.4% above the Bank of England bank rate until 5 April 2009.
Or, Dunfermline has launched a 30-day notice ISA paying 6.25% AER on deposits from £1. Transfers are not allowed.
Other attractive variable rate ISAs are now available for the new tax year. Scarborough Building Society pays 6.3% AER on deposits of £1,000 and accepts transfers but you will need to give 30-days notice to make a withdrawal.
Alliance & Leicester offers an instant account paying 6.25% AER on deposits of just £1. Transfers are accepted.
|Variable rate ISAs||AER||Notice or term||Deposit||Introductory bonus||Transfers?|
|Barclays Bank||6.5%||None||£1||1% for 12 months||No|
|National Counties BS||6.26%||None||£1||n/a||Yes|
|Alliance & Leicester||6.25%||None||£1||1% until 31/05/09||Yes|
|Source: Moneyfacts 14/04/08|
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.