Deal of the week

22 September 2008

People with ISA savings from previous years languishing in low interest accounts could cash in with a new variable-rate ISA from Royal Bank of Scotland.

The instant access ISA pays up to 7.25% AER tax-free – but only on balances over £24,000.

RBS offers this deal to anyone with £1+ to deposit, but only people able to transfer previous ISA savings are set to benefit from a higher interest rate.

First-time ISA savers (or those with no ISA savings to transfer) will only receive between 4.25% to 5.25% AER (variable) on their money (for full breakdown see table below).

But transfer customers receive an additional 2% bonus that brings the top interest rate tier to a competitive 7.25% AER.


AER (excluding bonus)

AER (with bonus)
£24,000 + 5.25% 7.25%
£15,000 - £32,999 4.95% 6.95%
£9,000 - £14,999 4.65% 6.65%
£3,000 - £8,999 4.45% 6.45%
£1 - £2,999 4.25% 6.25%
Source: RBS

As with many top deals, the devil is in the detail. Savers tempted by this offer should really only consider it if they have an ISA to transfer - and the amount of cash they’ve saved tax-free in previous years is substantial.

You can only pay into one ISA per tax year – so this deal is only for people who have yet to open a new ISA for 2008/09.

Also, bear in mind that the 2% bonus is paid in two instalments, the first at the end of March 2009 and the other at the end of March 2010. And RBS will not except transfers from NatWest ISAs.

What else is out there?

This instant access ISA from RBS has a variable rate of interest. Currently, rates on the top easy access ISA deals are just over the 6% mark.

Ruffler Bank’s 30-day notice ISA pays 6.11% AER on deposits from £3,600. Or Icesave’s easy access ISA pays 6.10% on deposits of £1,000.

Elsewhere, Barclays Bank’s Tax Haven ISA pays 6.08% AER on deposits from just £1, but this rate includes a 1% bonus for 12 months.

Egg also accepts deposits of £1+, and pays 6.05%. Or National Counties Building Society pays 6.01% again on £1 deposits.

Bear in mind that while Ruffler Bank and Icesave both accept transfers, Barclays, Egg and National Counties don’t.

If you’d rather opt for a fixed-rate account, then rates are currently a little higher.

Bradford & Bingley and Principality both pay 6.25% AER on deposits of £3,600, but only the latter accepts transfers.

Julian Hodge Bank pays 6.2% for one year on deposits of £3,600 while Newcastle Building Society pays 6.19% AEB until 15 October 2009 on deposits of £500. Both accept transfers.

For more of the best ISA rates read our daily round-up of the market

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