Over a million Barclays Isa customers to suffer rate cut
Barclays is shifting 1.6 million Isa customers onto a worse-paying cash Isa from November.
In order to "simplify the range" of the bank's Isa products, customers with any of 11 now 'off-sale' Isas will see their old accounts become the Instant Cash ISA Issue 1, which pays a tiered interest of between 1.29 and 1.49% AER.
However, eight of the 11 old accounts pay better rates than the Instant Cash Isa. The customers who will lose out include those with the following accounts: ISA Saver Issue 1; ISA Saver Issue 2; Golden ISA; Golden ISA Issue 2; Golden ISA Issue 3; Loyalty Reward ISA; Direct Cash ISA and Freestyle Cash ISA.
The best paying of those accounts is the Freestyle Cash ISA, which has an AER of 2.8%. The worst is the ISA Saver - Issue 1 paying 1.51% AER, which is still 0.02 percentage points higher than the new Instant Cash ISA.
The 740,000 customers of the three accounts that will see an uptick in their interest rate when the transfer happens this winter are those with a Barclays Cash ISA, a Tax Beater ISA or a Tax Haven ISA, which currently pay 0.1, 0.56 and 0.83% respectively.
The new account will pay 1.29% AER on balances between £1 and £14,999, 1.39% between £15,000 and £29,999 and 1.49% on £30,000 and above. Transfers in will be allowed. Access is in branch, over the phone, online or via mobile banking.
Lee Chiswell, head of Savings at Barclays, said: "We want to simplify the way we do business with our savings customers. These changes will make it easier for our customers to understand their products, and easier for our staff to serve them. Customers will also have the added benefit of being able to transfer-in.
"We are writing to all impacted customers to let them know how these changes will affect them, and we have worked with our colleagues to ensure they can support customers who have any questions about these changes."
Which instant access cash Isas beat the Barclays Instant Cash Isa - Issue 1?
On balances up to £14,999, there are more than 30 accounts listed on Moneywise.co.uk/compare that better the Barclays rate. The top three currently are the Buckinghamshire Building Society Chiltern Gold Nuggets Issue 4 paying 2% AER, the Punjab National Bank (International) Variable Rate Cash ISA also paying 2% and the First Direct Cash ISA paying 1.85%.
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.