Savings update: no respite for last-minute cash Isa savers
National Savings & Investments has announced it will cut the rate it pays on its popular Direct Isa to 1% from 1.25% for all savers from June.
The top rate on easy-access cash Isa is 1.4% from Coventry and Skipton building societies. But the new Skipton account, Bonus cash Isa, includes a 0.4 percentage point bonus paid for the first 12 months after which the rate drops to 1%.
Virgin Money pays 1.31% and Marks & Spencer Bank and Sainsbury's Bank 1.3%.
On fixed rate cash Isas, the top one-year deal is just 1.45% from Kent Reliance, while Virgin Money, Skipton Building Society and Marks and Spencer Bank all pay 1.4%. For two years Kent Reliance pays 1.65% and TSB 1.6%.
On taxable easy-access accounts RCI Bank Freedom account pays 1.45% before tax (1.16% after). Aldermore Bank and Kent Reliance pay 1.25% (1%).
On fixed rate bonds, the top one-year deal is 1.91% (1.53%) from Charter Savings Bank. On the high street, the best you can do is 1.4% (1.12%) from Skipton Building Society and Virgin Money.
For two years the Swedish-owned Ikano Bank pays 2.15% (1.72%) and Charter Savings Bank 2% (1.6%).
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.