Savings update: deals begin to disappear after tax year ends
Savers looking to use their cash Isa allowance for this tax year face disappearing top deals as banks and building societies either close their accounts or cut the rate.
The top rate on an easy-access cash Isa is 1.4% from both Coventry and Skipton building societies. But the 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%.
Yorkshire BS pays 1.35%, Virgin Money 1.31% and Marks & Spencer Bank and Sainsbury's Bank 1.3%.
On fixed rate cash Isas, the top one-year deal is just 1.5% from Aldermore Bank. Skipton Building Society and Marks and Spencer Bank pay 1.4%. For two years Aldermore pays 1.75% and TSB 1.6%.
Rates on taxable accounts are on the downward path too. On easy-access accounts the top deals come from RCI Bank Freedom account at 1.45% before tax (1.16% after) and Aldermore Easy Access at 1.25% (1%). Yorkshire Building Society 1.3% (1.04%) but you are restricted to taking money out of the account to just one day each year.
On fixed rate bonds rates, the best deal comes from newcomer Atom Bank, which launched its first accounts last week. It pays 2% (1.6%) for one year or 2.2% (1.76%) for two years. But you need an Apple iphone or ipad and to be pre-registered with the bank through its website to download the app.
Both Swedish Bank Ikano and Paragon Bank pay 1.8% (1.44%) for one year and Charter Savings Bank 1.71% (1.37%). For two years the best deals include Ikano Bank at 2.15% (1.72%) and Charter Savings Bank and Paragon at 2% (1.6%).
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.
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.