Savings update: cash Isa rates stagnant in run up to end of tax year
There is no sign of cash Isa rates improving in the run-up to the end of the tax year on 5 April.
Traditionally banks and building societies edge up rates on Isas at this time of year, to entice savers looking to use their allowance. But this year has met with a deafening silence.
Those looking to use their £15,240 cash Isa allowance for this year can earn 1.41% at best on easy-access accounts, through Virgin Money. Post Office pays 1.4% but this includes a bonus for the first 18 months, after which your rate drops to 0.65%. It also only allows two withdrawals a year.
On fixed-rate cash Isas the best you can do is 1.5% for one year with Virgin Money and Aldermore Bank. TSB pays 1.8% for two years.
On taxable fixed-rate bonds, the top one-year deal comes from Swedish-owned Ikano Bank at 1.9% before tax (1.52% after) or 1.76% (1.41%) from Charter Savings Bank.
For two years you can earn 2.15% (1.72%) with RCI Bank or Ikano Bank, or 2% (1.6%) with United Trust and Paragon banks.
The best easy-access deal is the online RCI Bank Freedom account at 1.55% (1.24%). Virgin Money Defined Access pays 1.31% (1.05%), but you are limited to three withdrawals a year.
Shawbrook Bank Easy Access 3 offers 1.3% (1.04%) with no withdrawal restrictions.
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.