Rates on cash ISAs continue to creep upwards, with the launch of a new deal from Abbey that pays 3.5% AER.
The new Reward ISA, which is also available from Abbey’s sister banks, Alliance & Leicester and Bradford & Bingley, has taken top place in the variable rate ISA best-buy tables. The account’s headline rate is actually 1.5%, but at the end of the first year you’ll receive an additional 2% bonus.
The only condition is that you don’t touch your ISA savings during the first 12 months. The account does not accept transfers, but can be opened from as little as £1.
Abbey also offers a Direct ISA paying 2.5% variable for the first 12 months, that does allow transfers of ISA savings from previous tax years.
Reza Attar-Zadeh, director of savings and investments at Abbey, says: “Even in the current low interest rate environment the long-term benefits of holding money in a tax-free account remain the same as always.”
She adds that a basic rate taxpayer would have to find a savings account paying 4.37% to get the same return from Abbey’s Reward ISA.
Rates on cash ISAs have taken a battering, thanks to the Bank of England reducing the base rate from 5% in October to an historical low of 1% in February. It is expected to cut the base rate again this Thursday, potentially to as low as 0.1%.
However, with the end of the tax-year now on the horizon, the cash ISA market does seem to be picking up. Nationwide, Halifax and Chelsea Building Society all recently launched new fixed-rate ISA offerings paying 3% AER.
Best-buy variable rate ISAs
* Includes 2% bonus
paid after one year
* £1 deposit
Advantage Cash ISA
* Includes 1% bonus
* £100 deposit
Cash ISA Direct Access
to 30 days' notice
* £3,000 deposit
to 90 days' notice
* £1 deposit