Savings update: NS&I cuts Direct Isa to 1%: where to get a better deal
Rates on offer from National Savings & Investments go down from today (Monday 6 June). Its Direct Cash Isa now pays 1%, down from 1.25%, while its Income Bonds pay 1% before tax (0.75% after tax) and Direct Saver 0.8% (0.64%).
Better news comes from Virgin Money which has relaunched its Defined Access Isa at 1.26% tax-free. It puts it among the best easy-access Isa, although you are only allowed to make three withdrawals each year.
Other good deals include Coventry Building Society's Easy Access Isa 3 and Sainsbury's Bank Cash Isa, both at 1.3%. You can't transfer your existing cash Isas into the Coventry account.
On fixed rate cash Isas Britannia, a trading name at Co-op Bank, pays a top 1.4% fixed until 31 July 2017 or 1.5% until 31 July 2018.
With Tesco Bank you can earn 1.3% for one year, while other top two-year deals include Virgin Money, Leeds Building Society and Shawbrook Bank at 1.4%.
On taxable accounts the top rate on easy-access accounts at 1.45% before tax (1.16% after tax) comes from French-owned RCI Bank while Shawbrook Bank pays 1.25% (1%). Both accounts are only available online.
On taxable fixed-rate bonds RCI Bank pays a top 1.65% (1.32%). Charter Savings Bank and Swedish-owned Ikano Bank both pay 1.6% (1.28%).
For two years the best deal is 1.9 per cent (1.52 per cent) from RCI Bank, followed by 1.85 per cent (1.48 per cent) from Ikano Bank and 1.8 per cent (1.44 per cent) from Tesco Bank, Close Brothers and Paragon Bank.
This story was originally written for our sister magazine, Money Observer.
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.