Saffron Building Society appears to have bucked the trend for dismal cash ISA rates with the launch of an account that pays 7% AER.
Recent figures from the Bank of England suggest that average rates on cash ISAs at the end of January were a dismal 1.38% - down from 5.06% in the same month last year. As a result, increasing numbers of savers plan to withdraw their tax-free cash ISA savings, with many looking at stocks and shares ISAs as an alternative.
But several regular ISA savings deals – including Saffron Building Society’s – pay AERs that suggest cash savings haven’t completely cost their sheen.
Saffron Building Society’s deal can only be accessed via post or in-branch, but pays a fixed rate of 7% AER for one year. You’ll need £25 as an upfront deposit to open this account, and you must pay in between £25 and £300 a month in order to qualify for the rate.
As with all cash ISAs, the maximum amount you can save per tax-year is £3,600 but your money will grow tax-free. This account also offers instant access for withdrawals.
Unfortunately, this ISA does not accept transfers for the first 12 months, so you won’t be able to earn 7% interest on ISA savings from previous tax years.
In addition, if you miss a monthly payment, you will be automatically moved into Saffron's Easy Access ISA – currently paying just 0.85%.
First Direct also offers a regular saver ISA paying 7% AER, fixed for 12 months. Like Saffron Building Society, you will need to put between £25 and £300 into this account each month. However, partial withdrawals are not permitted.
Again, transfers are not accepted and if you miss a payment you will see your money moved to a standard e-ISA paying 1.4% AER.