ISA of the week: Nationwide Flexclusive ISA Savings Account
One of the highest-paying ISA accounts on offer is the Nationwide Flexclusive account, with an interest rate of 4.25%. This is rare for an instant-access account - to get a similar return from any other provider, you'd have to lock your money away for several years.
However, Nationwide isn't being too generous - there are a few catches.
First, the rate has a bonus of 2.25% until 31 October 2013, so at this point you'll need to move your money elsewhere or your interest rate will plummet.
Your primary current account will also need to be the Nationwide FlexAccount holder, which requires a deposit of at least £750 each month, and transfers in from other ISAs aren't allowed. But as the rate is leagues above anything else around, it could be worth switching to take advantage of it.
The account can be opened with £1 and the rate is variable, but guarantees to be at least 1.5% above the Bank of England's base rate until 1 January 2014.
Go to nationwide.co.uk for more details or call 0800 302010. But be aware that the account can only be operated in-branch.
It's rare to find an instant-access account with such a high rate, especially one that is also tax-free. However, you'll have to put in the legwork of switching current accounts in order to access it and given the 4.25% rate only lasts 18 months it may not be worth the hassle.
But if you are willing to switch providers, and if you remember to keep an eye on the rate, you'll be rewarded with a high return and the flexibility to withdraw or deposit money as and when you need to.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
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.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.