Savings update: Move quickly for best rates
Savers have to move quickly to grab top rates on easy-access accounts, as these do not stay around for long.
Both Tesco and Kent Reliance have launched new deals at lower rates. Tesco Bank new Internet Extra pays 1.5 per cent (1.2 per cent after tax), down from its previous 1.6 per cent (1.28 per cent), which was on sale for just two weeks.
The new deal includes a 0.75 (0.6) percentage point bonus for the first year. Kent Reliance Easy Access account now pays 1.35 per cent (1.08 per cent) to new savers. Last month it offered 1.65 per cent (1.32 per cent).
The top deal on easy-access accounts comes from French-owned RCI Bank, part of the Renault group, at 1.65 per cent before tax (1.32 per cent after tax) on its Freedom account. But here you are not covered by the UK compensation scheme. If the bank goes bust, you claim from the European scheme where the maximum amount is €100,000 (around £73,500).
The latest issue of Post Office Online Saver pays 1.61 per cent (1.29 per cent), including a bonus for the first year you are in the account. After this the rate drops to 0.65 per cent (0.52 per cent).
On fixed rate deals, internet bank Charter Savings pays a top 2.07 per cent (1.66 per cent) for one year. RCI Bank pays 2.06 per cent (1.65 per cent) and Shawbrook Bank 2.05 per cent (1.64 per cent).
For two years you can earn 2.4 per cent (1.92 per cent) with Paragon Bank, 2.35 per cent (1.88 per cent) with RCI or 2.32 per cent (1.86 per cent) with Charter Savings Bank.
On easy-access tax-free cash Isas, Virgin Money now pays 1.56 per cent on its Defined Access Isa, which limits you to three withdrawals a year. The top deal with no bonus or withdrawal restrictions is 1.4 per cent, from Nationwide. Both accept transfers from other providers.
On fixed rate cash Isas, Shawbrook Bank pays a top 1.85 per cent and Virgin Money 1.81 per cent for one year. For two years Mansfield Building Society offers a top 2.1 per cent, but you can't transfer your existing cash Isas into this account. Virgin Money pays a 2.06 per cent and accepts transfers.
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.