Abbey launches 3.5% ISA

Published by Rebecca Atkinson on 03 March 2009.
Last updated on 05 March 2009

Deal of the week

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

 

Provider AER Transfers? Details
Abbey
Reward ISA
3.5% No

* Includes 2% bonus
paid after one year
* £1 deposit

Marks & Spencer Money
Advantage Cash ISA
3.1% Yes

* Includes 1% bonus
until 21/04/2010
* £100 deposit

Standard Life Bank
Cash ISA Direct Access
3% Yes * £1 deposit
Holmesdale Building Society
Cash ISA
3% Yes * Withdrawals subject
to 30 days' notice
* £3,000 deposit
Dunfernline Building Society 3% Yes * Withdrawals subject
to 90 days' notice
* £1 deposit
Correct 03/03/2009

 

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