NatWest has launched a new cash ISA account offering an instant access cash ISA with a headline rate of 3.51% AER.
Customers who already have an Advantage Gold or Private account with NatWest will also receive an additional bonus of 0.5% for 12 months – bringing the AER to 4.01%. However, to get this bonus you must open your account before 20 April 2009.
The interest on this ISA is variable, so it could fall in-line with the Bank of England base rate. However, NatWest guarantees that this account will not pay less than the base rate (which is currently just 1%) until 1 February 2010.
You can open this account with an initial deposit of £1 and can save up to your full cash ISA allowance of £3,600. Withdrawals are allowed without attracting a penalty, but bear in mind that once you withdraw money out of an ISA you lose the equivalent value from your tax-free allowance.
Unfortunately, this ISA doesn’t accept transfers so you won’t be able to move any ISA savings from previous tax years into NatWest’s deal. Interest is paid on a monthly basis.
There is a big catch with this deal – you need to have a NatWest current account or instant access savings deal before you can open this ISA.
Other NatWest ISAs
If you do want to transfer your ISA savings from a previous tax year, then NatWest also offers an e-ISA account paying up to 3.51% AER that accepts transfers.
If your balance is less than £9,999 then you’ll earn an AER of 3.25%, but move more than £10,000 into this account and your rate will increase to 3.51%.
There are no withdrawal penalties on this deal and interest is paid monthly. Bear in mind that this deal can only be accessed via the internet.
Elsewhere in the market
1. Variable-rate ISAs
NatWest’s 3.51% ISA offering is pretty competitive when compared to other variable-rate ISAs.
Marks and Spencer Money pays 3.1% on its Advantage Cash ISA, which can be opened with a £100 upfront deposit. This deal includes a 1% bonus until 21 April 2010.
M&S allows you to make unlimited withdrawals without penalty from this account, and you can also make regular payments of at least £25 by monthly direct debit. Transfers are accepted. Read more about this deal.
Or Egg has a cash ISA paying 3.05% AER on deposits from £1. This deal will at least match the Bank of England base rate until 5 April 2009, and allows regular payments as well as one-off deposits. Withdrawals are also permitted without penalty, but transfers are not accepted.
Finally, Earl Shilton Building Society pays 3.05% AER on its 90-day cash ISA, which can be opened with a deposit of at least £10. Withdrawals are allowed, as long as you give 90 days’ notice, and transfers are accepted.
2. ISAs accepting transfers
The M&S Advantage Cash ISA and Earl Shilton’s ISA both accept transfers. Elsewhere, Halifax pays 4% AER on its fixed-rate ISA – but bear in mind this is a four-year bond and no withdrawals are allowed during this period.
You can open this account with a £500 deposit, but no additional deposits are permitted. If you want a shorter term, then you can opt for Halifax’s one-year fixed ISA account, which pays 3.1%, or its two-year deal paying 3.5%. Its three-year ISA pays 3.7% AER.
Elsewhere, Standard Life Bank’s cash ISA Direct Access pays 3% AER on deposits from £1. This rate is variable, and withdrawals are permitted.
3. Fixed-rate ISAs
If you would prefer the security of a fixed-rate of interest, and have a lump sum of at least £500 to deposit, then M&S also offers a fixed-rate ISA. If you choose to fix for one year, you'll earn 2.5% interest, rising to 2.75% if you fix for two or three years.
However, bear in mind that any early withdrawals will see you hit with a fixed flat penalty of up to £100.
Dunfermline Building Society offers a fixed-rate ISA paying 3.75% AER until 31 October 2011. You need to deposit £100 to open this account and further deposits are permitted. Withdrawals are also allowed but you will lose 180 days of interest as a result.