Savings update: best fixed-rate deals offered by new banks
New banks continue to offer savers the best fixed-rate deals as they compete with each other for your money.
The top one-year deal comes from Charter Savings Bank at 2.07 per cent before tax (1.66 per cent after tax).
French-owned RCI Bank, part of the Renault group, and FirstSave both pay 2.06 per cent (1.65 per cent), while Harrods Bank now offers 2.03 per cent (1.62 per cent) and Paragon Bank 2.01 per cent (1.6 per cent).
In contrast the best deals from traditional banks and building societies are 1.75 per cent (1.4 per cent) from Leeds Building Society or 1.65 per cent (1.32 per cent) from Nationwide. Last week Halifax cut its one-year rate to just 1.15 per cent (0.92 per cent).
EASY-ACCESS AND CASH ISAS
For two years top deals include Paragon Bank at 2.4 per cent (1.92 per cent) along with RCI and Hampshire Trust banks at 2.35 per cent (1.88 per cent).
The best rates on easy-access accounts include RCI Bank Freedom Account at 1.65 per cent before tax (1.32 per cent after tax).
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).
BM Savings' Online Extra Issue 19 pays 1.6 per cent (1.28 per cent), but once again the rate is boosted by a short-term bonus. It drops to 0.25 per cent (0.2 per cent) after 12 months.
On tax-free accounts, Post Office Online Cash Isa pays 1.51 per cent including a 0.86 percentage point bonus for the first 12 months.
Virgin Money Defined Access Isa is a slightly better rate at 1.56 per cent, but it limits you to making three withdrawals a year - although there is no bonus on this account.
The best deal with no bonus and no withdrawal facilities comes from Nationwide's Instant Isa Saver Issue 3 at 1.4 per cent.
On fixed rate cash Isas, Virgin Money pays a top 1.81 per cent for one year, followed by the new AA Savings deal (where the deposit taker is Bank of Ireland), at 1.75 per cent. Virgin Money pays 2.06 per cent for two years.
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.