NatWest Isa savers hit by rate cuts
NatWest has announced it is halving the rate on its instant access Isa to just 0.25% for some savers, following a rate cut by NS&I.
From 1 December, the rate on the NatWest cash Isa will fall from 0.5% to 0.25% on deposits up to £25,000. Investors with £25,000 to £50,000 will now receive 0.5%, down from 1%. Deposits of £50,000 to £100,000 will be cut by a quarter to 0.75% and those with more than £100,000 will see their rates unchanged.
NatWest is also increasing overdraft charges on its Select Platinum and Select Black accounts, to a daily charge of £6. However, the accounts do offer fee-free overdrafts of £250 and £500 respectively.
A NatWest spokesperson said: “We are reducing our NatWest Cash ISA interest rates in line with market conditions and our competitors. We have written to customers informing them of changes to their account, which will take place on 1 December, to allow them time to decide how they allocate their 2015/16 ISA allowance”.
The bank also says it remain committed to promises made in 2014 that it will not offer preferential rates to new customers or offer introductory bonus rates.
If you will be affected by the rate cut you don’t need to wait until 2016 to move your money to a better account. You’re only allowed to open one Cash Isa each year, but you can switch to another providing you transfer all the money you’ve saved this year. You’re free to move as much or as little of your Isa savings from previous years whenever you like.
Virgin Money has an online-only Isa that pays 1.56% AER if your balance is £1 or higher, and accepts transfers, providing you make no more than three withdrawals a year. Nationwide customers can get a slightly higher 1.6% rate with no withdrawal restrictions. The Bank of Punjab will pay 1.65% AER, but it is a branch-only account and it has a limited network in the UK.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
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.
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.