Savings update: top rates keep on falling
Fixed rate deals continue to fall both on bonds and cash Isas.
Tesco has cut the rate on its one-year fixed rate cash Isa from 1.75 per cent to 1.31 per cent for new savers. The best deal is now 1.65 per cent from Virgin Money, Leeds Building Society and Shawbrook Bank.
On easy access cash Isas, Coventry Building Society pays a top 1.5 per cent while Virgin Money Defined Access Isa pays 1.41 per cent. The latter limits you to three withdrawals a year. Both accept transfers from other providers.
On taxable bonds, the best one-year fixed rate deal comes from RCI Bank at 2.06 per cent before tax (1.65 per cent after).
With this French-owned bank your money is covered by the European compensation scheme which gives €100,000 (around £76,000), rather than the UK scheme.
The next best deal is 1.91 per cent (1.57 per cent) from Paragon Bank.
On easy-access accounts you can earn 1.65 per cent (1.32 per cent) at best from internet accounts run by both RCI and ICICI banks. Paragon Bank pays 1.46 per cent and Shawbrook 1.45 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.