Fixed-rate bond deals continue to rise
Charter Savings Bank has raised the rate for new savers taking out its two-year fixed rate bond to 2.25% (1.8% after basic rate tax). It was followed by a rise at Vanquis Bank to 2.26% (1.81%).
Both Paragon and Shawbrook banks pay 2.2% (1.76%) and Secure Trust 2.21% (1.77%). The best deal from high-street household names come from Post Office at 1.95% (1.56%) and Nationwide at 1.8% (1.44%).
For one year you can earn 2.06% (1.65%) with Charter Bank, 2.05% (1.64%) with United Trust Bank, or 2.01% (1.61%) at Vanquis Bank.
On easy-access accounts the best rate comes from French bank RCI's Freedom account at 1.5% (1.2%). Kent Reliance's Online Easy Access account pays 1.45% before tax (1.16% after).
BM Savings, part of Halifax, also pays 1.5% (1.2%) on its Online Extra issue 17, but the rate includes a 1 percentage point bonus which lasts for the first year you are in the account.
Virgin Money Defined Access Account pays 1.41% (1.13%) though you are restricted to making three withdrawals a year to earn this rate.
All of the above accounts bar RCI Bank Freedom are covered by the UK Financial Services Compensation Scheme which gives you £85,000 of cover if a bank goes bust. Your money with the French bank is covered by the European scheme which provides a lower €100,000 (around £73,000) safety net.
It was announced that the UK level of cover will fall to £75,000 from 1 January next year. The amount of savings that are guaranteed with a bank or building society is set by the Financial Services Compensation Scheme.
But it is guided by the European amount and converted into sterling with a rate set for five years. In 2010, when it was last set, €100,000 was worth about £85,000. But since then the euro has plunged in value because of the crisis in countries such as Greece.
Savers who have between £75,000 and £85,000 in fixed rate accounts with one bank or building society are expected to be given the chance to move the surplus across without penalty between 1 August and 31 December. Full details will be revealed at the end of this month.
Best cash Isas
The top rate on easy-access cash Isas comes from National Savings & Investments at 1.5% - but you can't transfer your existing cash Isas into this account. Nationwide's Instant Isa Saver 3 pays 1.4% and accepts transfers.
On fixed-rate cash Isas the best deal for one year is 1.65% from Nationwide, Virgin Money and Shawbrook Bank. Kent Reliance and Shawbrook both pay 1.85% and Nationwide 1.8% for two years. All accept transfers from other providers.
This article was written for our sister website Money Observer
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.