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Savers faced with losing ISA allowance or settling for lower rate

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Written by: Paloma Kubiak
20/03/2017
Rates on standard savings accounts outshine those of ISAs, meaning savers are faced with a tough choice of losing this tax-year’s ISA allowance forever or making do with a much lower rate.

The number of ISA products has risen to 311 from 303 recorded in September 2016, according to data site Moneyfacts.

This marks the first time the number of ISAs has stood above 300 since September, though it’s fallen slightly from 317 recorded in March last year.

Moneyfacts found that the long-term ISA rate has also risen for the fourth consecutive month (1.03%), though it’s a far cry from the 1.69% average rate offered in March 2016.

However, despite the positive news which raises the hopes that this year’s ISA season is showing small signs of life, Charlotte Nelson, finance expert at the data firm, said savers face a tough decision.

“Despite all the positive news surrounding ISAs, rates on standard accounts continue to outshine them. For example, the average long-term fixed rate (excluding ISAs) stands at 1.34% in March, a whopping 0.31% higher than its ISA counterpart. So, savers are now faced with the hard choice of either losing their ISA allowance or settling for a much lower rate.

“If a small ISA season is on the horizon after all, it is likely to be a quick affair – savers might indeed blink and miss it. Savers will therefore have to stay alert and act fast if they see a deal that attracts their attention,” she said.

Nelson added that 26% of providers have either increased or launched a fixed ISA product this month, though the main banks have failed to get in on the action which means rates will be subdued.

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