NS&I proves exception as savings rates creep up
National Savings & Investments (NS&I) is to cut the rate on its Direct Isa by 0.25 percentage points to 1.25%, from 16 November. The cut comes as rates from other banks are edging up.
Post Office, where the deposit taker is Bank of Ireland, has raised its Online Isa rate to 1.51% for new savers. The rate includes a bonus of 0.86 percentage points, which is payable for the first 12 months after you open an account.
Virgin Money Defined Access Isa also pays 1.51% with no bonus, although you are limited to making three withdrawals a year from your account. The best deal with no bonus and no withdrawal restrictions is Nationwide's Instant Isa Saver Issue 3 at 1.4%. Both accept transfers from other providers.
On fixed-rate cash Isas, Shawbrook Bank has upped its rate to 1.85% if you are willing to tie your money up for one year. Virgin Money is the next best payer at 1.76%. For two years Virgin Money pays a top 2.06%, just ahead of Coventry BS at 2.05% fixed until 30 November 2017.
On easy-access taxable accounts Tesco Bank has raised the rate on its Internet Saver to 1.6% before tax (1.28% after tax) for new savers.
The rate includes a bonus of 0.85 (0.68) percentage points for the first 12 months, after which the rate drops to 0.75% (0.6%).
This makes it one of the top-paying accounts, matching the 1.6% (1.28%) from BM Savings (which includes a 1.35 (1.08) percentage point bonus for 12 months).
The best rate comes from French-owned RCI Bank, at 1.65% (1.32%) with no bonus. But you are covered by the European deposit protection scheme on this account, which gives you €100,000 (around £72,400) rather than the £85,000 available under the UK scheme.
On fixed rate deals you can earn 2.06% (1.65%) with both RCI Bank and Charter Savings Bank for one year. For two years RCI pays a top 2.35% (1.88%) and Charter Savings Bank 2.28% (1.82%).
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.