Savings update: top easy-access deal slips below 1%
Banks and building societies have been busy cutting rates since the Bank of England cut base rate to 0.25% earlier this month. Even the top easy-access account now pays less than 1% after tax.
That deal, French-owned RCI Bank's Freedom account, has cut its rate to 1.2% before tax (0.96% after tax). With this account you are covered by the European compensation scheme, which gives €100,000 (£86,000) worth of cover is the bank goes bust, and not the UK scheme. Internet bank Shawbrook pays 1.1% (0.88%).
On the high street the top rate is 1.05% (0.84%) from Virgin Money's Manchester United Red Devils account and 1% (0.8%) from Coventry BS.
Check all rates before committing
Top one-year fixed rate deals include 1.45% (1.16%) from Swedish Bank Ikano - where, as with RCI Bank, you are covered by the European scheme if the bank runs into trouble.
Hampshire Trust and Paragon banks both pay 1.35% (1.08%) while on the high street the best deal is 1.2% (0.96%) from Virgin Money.
For two years you can earn 1.65% (1.32%) with both Ikano and Paragon banks. The top high street rate is 1.35% (1.08%) from Kent Reliance or 1.25% (1%) from Leeds Building Society.
On tax-free cash Isas new savers can earn 1.1% with Coventry Building Society easy-access account while the best one-year fixed rate deal comes from Shawbrook Bank at 1.3%. For two years Paragon Bank pays 1.35%.
Check all rates before committing your money. Rates are extremely fluid and can change at any time.
This article 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.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.