Nationwide launches market-leading ISA
Nationwide is to launch a new market leading fixed-rate ISA paying 3.3%.
The 18-month Loyalty fixed-rate ISA is to be introduced tomorrow, alongside the launch of its 18-month Loyalty fixed-rate bond, which pays the same amount of interest.
Currently, only Barnsley Building Society and Chelsea Building Society match Nationwide's 3.3% rate on their fixed ISA deals.
Nationwide's director for savings Robin Bailey says:
"The fixed-rate market continues to be a competitive place for savers looking to tie their money in for a fixed period at a rate of interest that won't change."
Both savings accounts can be opened with balances of just £1, but are only available to existing Nationwide customers.
Bailey says this demonstrates Nationwide's "commitment to offering long-term good value", and "our promise to reward existing savers".
The maximum that can be deposited into the ISA is £5,340 – the annual ISA limit, while savers can pay up to £5,000 into the bond or £10,000 if it's a joint account.
Savers will lose 180 days' worth of interest for closing either one of the Loyalty accounts early.
Andrew Hagger, spokesperson for comparison site Moneynet, recommends savers use the ISA before the fixed-rate bond because of the tax incentives:
"If you haven't made use of your annual tax-free allowance, then the ISA option should be your first port of call as it will immediately save you the 20% [or 40% for higher rate taxpayers] tax on any interest earned."
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.