Cash ISAs: top rates for last minute savers
You have until the end of tomorrow to deposit up to £15,240 into an ISA. With record low rates of interest on offer, it’s more important than ever to shop around.
The lead up to the end of the tax year is traditionally the time banks and building societies flood the market with attractive ISA rates and deals.
This year, however, has been described as the “worst ISA season since ISAs began in 1999” by Susan Hannums of the site SavingsChampion and a “complete non-event” by Andrew Hagger of MoneyComms.
In fact, we’ve seen rate cuts from the likes of National Savings & Investments (NS&I) and BM Savings.
For savers looking to deposit money into a cash ISA, the best instant access rate available is 1.40% from Coventry Building Society.
Savers who are willing to tie their money up for one year can get 1.45% from Kent Reliance, 1.65% from Kent Reliance if they go for a two-year fix and 2.33% from United Bank UK for a five-year fix.
Savers could also consider Sharia-compliant cash ISA accounts (it is against Islamic law to pay or charge interest but savers are given a share of profit and the accounts are covered by the Financial Services Compensation Scheme).
These pay higher rates than the providers listed above. The Al Rayan Bank’s Notice Cash ISA (minimum £250) pays 2% variable whereas the Al Rayan Bank’s 12 month Fixed Term Deposit Cash ISA (minimum £1,000) pays 1.90%.
Are cash ISAs still worth it?
Over the past four years, cash ISA rates have fallen from just above 3% on 5 March 2012 to around 1.4% on 5 March 2016, according to statistics from SavingsChampion.
Hannums says: “With low rates on offer and the impending Personal Savings Allowance putting the nails in the coffin for the humble Cash ISA, we fear the standard Cash ISA may become obsolete over time.
“The saving grace is the introduction of new ISAs from the government including the Help to Buy ISA and the Lifetime ISA (the latter being made available next year) both of which offer a 25% cash boost from the government. But those with money in existing cash ISAs hoping for better things to come, could be disappointed if early signs are anything to go by.”
Hagger adds savers need to calculate the risk they’re prepared to take in order to receive decent returns.
He says: “To earn a better return savers have to weigh up options that come with some risk – stocks and shares have performed well in the past but are considered a longer-term investment, while Peer to Peer providers RateSetter, Zopa, Lending Works and CrowdStacker are also worth a look but again are not 100% safe as with FSCS protected cash savings – so it’s about considering a calculated risk to earn greater returns.”