Find the cash ISA for you
ISA season is here and the time is ripe for shopping around for the best cash individual savings account for your needs.
Remember, though, there's more to picking a cash ISA than chasing the headline rate. Accessibility and terms and conditions are more significant if you need easy access to your money or want to transfer a previous year's ISA balance.
Compare what's on offer
Use comparison websites like moneysupermarket.com and moneyfacts.co.uk to compare ISAs. Moneywise.co.uk's comparison tools are also useful. Also refer to our regular cash ISA round-up.
Watch out for bonus rates
ISA accounts will be listed according to their interest rate. But watch out for bonus interest rates (and terms and conditions) that could affect the enticing headline rate offered.
For example, Santander's Direct ISA pays 2.75%, but this includes a 2.25% bonus for the first 12 months; after that the interest drops to 0.5%. Some of the more competitive cash ISAs are only available online or by phone.
Transfer your cash to a new ISA
If your money is in a paltry interest-paying cash ISA account, it could be worth finding a new one. However, not all cash ISAs accept transfers in, and the ones that do tend to offer slightly lower interest rates.
Santander's Flexible ISA offers a rate of 2.85% but doesn't accept transfers, for example.
Consider a fixed-rate ISA
If you don't want to switch ISAs each year, consider a fixed-rate ISA. Some accounts pay over 4% for a four or five-year fixed term, though you should be wary of locking your money away for such a long period as interest rates are likely to improve.
Fixed-rate accounts don't permit withdrawals; if you need to access your cash early you'll have to close your account, losing around 180 days' worth of interest.
Avoid the last-minute dash
The new tax year begins on 6 April 2011, so check the deadlines with individual providers. If you apply for an ISA in-branch, the paperwork will need to go through a few days in advance.
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.