Savings update: rates for new savers continue to fall
Halifax and Lloyds pay just 0.6 per cent on their easy-access cash Isa to new savers, while Nationwide has cut its rate from 1.4 per cent to 1.2 per cent.
The top deal with no bonus and no withdrawal restrictions comes from Coventry Building Society at 1.5 per cent. The Post Office pays a marginally higher 1.51 per cent, but the rate includes a bonus for the first 12 months after which it drops to 0.65 per cent.
The best fixed-rate cash Isa deals for one year come from AA Savings – where the deposit taker is Bank of Ireland – at 1.76 per cent, followed by Tesco Bank at 1.75 per cent.
For two years AA Savings pays 2.01 per cent, while Shawbrook Bank and Principality Building Society both offer 2 per cent.
On taxable fixed-rate bonds the top one-year rate comes from United Trust Bank at 2.15 per cent (1.72 per cent after tax), while FirstSave pays 2.12 per cent (1.7 per cent). For two years you can earn 2.35 per cent (1.88 per cent) from RCI Bank and Harrods Bank.
On easy-access taxable accounts the best rate is still 1.65 per cent (1.32 per cent) from RCI Bank Freedom Account. With this bank you are not covered by the UK compensation scheme. If the bank goes bust you can claim from the European scheme where the maximum amount of compensation is €100,000 (around £70,000).
The next best rate is Tesco Bank Internet Saver at 1.5 per cent (1.2 per cent) including a 0.75 (0.6) per cent bonus for 12 months. Skipton Limited Edition eSaver pays 1.4 per cent (1.12 per cent).
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.