Virgin ups rates on cash ISAs
Virgin Money has slashed the rate on its Cash ISA, with customers now only getting 1.75%, compared to a previous 2.15%, but Virgin has rolled out some new rates that are far more pleasing to those looking for relatively risk-free savings.
According to Moneywise's comparison site, Virgin's five-year fixed rate Cash ISA, paying 2.75% AER, is a current best buy. For a shorter term investment, Virgin's one-year fixed rate Cash ISA is paying 2%, while the three-year fixed Cash ISA is offering 2.2%.
Currently, the best cash ISA rate is 2.25% from NS&I, though this product will see a rate drop (down to 1.75%) on 12 September, NS&I announced.
Elsewhere on the market, Britannia's Fixed Rate ISA (to 31/07/2014) offers 2.35%, and Coventry Building Society's Fixed Rate ISA pays 2.35%. However, both accounts require a minimum deposit of £5,760, whereas Virgin's can be opened from £1.
Virgin Money's new range of bonds includes a five year Fixed Rate Bond paying a rate of 2.75%. If you are prepared to put your money away for slightly longer, Skipton Building Society's seven-year bond is offering a market-leading rate of 3.5%.
Other products launched by Virgin include a one-year fixed rate bond offering a rate of 1.75%, and a three-year fixed rate bond offering a rate of 2.2%.
There are better rates on the market with First Save's one year Loyalty Bond offering 2.15%, and ICICI Bank's three-year SuperSaver Bond offering 2.55%.
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.