How to get a 3% cash Isa rate
Savvy savers who can put away their money for five years can now reap the rewards with a 3% interest rate.
Both Skipton and Newcastle building societies are offering five-year fixed-rate cash Isas paying 3%.
Withdrawals are not permitted during the term and if the account is closed during the five-year period, there is a penalty of 240 days' loss of interest.
The account can be opened and managed in branch, online and by post. But the 3% rate does not include an introductory bonus and up to £1 million can be saved in the account.
Meanwhile, the Newcastle Building Society: Member ISA Issue 10 product also has a minimum deposit of £500.
Unlike the Skipton account, it can only be opened and managed in branch or by post. There is no online access or phone service available.
Withdrawals are permitted subject to a penalty of 120 days' loss of interest. Transfers in are accepted and the maximum deposit is £250,000.
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.