Leeds BS launches market-leading ISAs
Finding a savings account paying more than inflation these days can be like looking for a needle in a haystack, but longer-term fixed products offer some solace.
Last month saw Leeds Building Society launch two new five- year fixed-rate Isas – both of which shot straight to the top of the best buy tables.
The No Access Isa pays 3% fixed until 31 October 2018 and can be opened with a minimum of £1, with interest paid on 31 October each year. However, this Isa does not allow withdrawals without loss of interest.
The building society's other five-year product - the Fixed Access Isa - pays 2.75% and allows withdrawals of up to 25% of the original amount invested without penalty.
Savingschampion.co.uk director Susan Hannums says this is a positive move from Leeds BS, with both Isas head and shoulders above the rest of the market. "The five-year No Access Isa is one of only three Isas that beat inflation, following the launch of another five-year fixed-rate Isa, also paying 3%, from Skipton Building Society."
Hannums says the Leeds Isa that allows penalty-free withdrawals is unusual because many rival accounts charge a hefty penalty for doing so. "It's good to give people different options and it will suit some people's circumstances more than others.You would have to compromise on the rate, although 2.75% is still fairly competitive for a five-year fixed-rate Isa."
The Skipton Five-year Fixed Rate Cash Isa, also paying 3%, is fixed to 12 October 2018 and requires a minimum opening balance of £500.
Leeds BS has launched a Five-year Fixed-Rate Bond paying 3%, which can be opened with a minimum investment of £100, and does not allow withdrawals until the day after maturity.
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 increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
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.