Your cash can still earn 7%

Published by Rebecca Atkinson on 20 February 2009.
Last updated on 20 February 2009

Number on wood

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.

 

 

 

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