New £20,000 Isa allowance – where to find the best savings rates

Isa-form-with-pound-coin

Cash Isa rates have edged up with the launch of Charter Savings Bank easy-access account at 1.05 per cent. In its wake, Coventry Building Society upped the rate on its Easy Access Cash Isa from 0.96 per cent to match it while Paragon Bank also pays 1.05 per cent. 

You can earn a whisker more – 1.06 per cent -  with Virgin Money’s Defined Access Isa but with this account you are limited to making three withdrawals a year.

Charter Savings Bank has also launched top fixed rate deals.  Its one-year fixed rate cash Isa pays 1.31 pc while Virgin Money pays the top two-year fixed rate at 1.55 per cent, followed by Charter at 1.52 per cent. 

On easy-access Ulster Bank continues to offer the top deal at 1.25 per cent where the rate does not include a bonus.

ICICI Bank Hi-Save Bonus Account also pays 1.25 per cent but the rate includes a 0.6 percentage point bonus payable to 30th September next year. 

Other top deals include Shawbrook Bank, Bank of Cyprus UK and RCI Bank all at 1.2 per cent.

On fixed rate bonds Atom Bank, where you run your account through an app on your smart phone or table, pays 1.9 per cent with the next best rate coming from new internet bank Wyelands at 1.83 per cent. For two years - Secure Trust Bank's new bond pays 2.11 per cent.

Watch out for savings traps

Banks and building societies are coming out with new accounts paying top rates for new savers. But don’t just go for the rate on these easy-access taxable accounts or tax-free cash Isas – make sure that the terms and conditions suit you. 

These are becoming increasingly complicated.  Some severely restrict the number of withdrawals you can make each year.  Others come with a bonus which disappears after a year, leaving you on a paltry rate unless you move your money to a new account.  

Virgin Money’s new Double Take E-Saver, available online only, pays 1.21 per cent. The rate on the new easy-access account puts it just behind the top 1.25 per cent from Ulster Bank.

But the Virgin Money account limits you to making just two withdrawals a year.  Closing your account counts as a withdrawal and so you will not be able to close it if you have already made two withdrawals in a calendar year. There are no such restrictions on Ulster Bank’s e-Savings account at 1.25 per cent.  

The new West Bromwich Building Society Websave Single Access at 1.2 per cent is even harsher on withdrawals – just one a year.

- Individual savings accounts: a beginner's guide

Yorkshire Building Society branch-based Single Access Saver at 1.1 per cent gives you access to your money on just one day a year.  On that particular day – of your choice – you can make as many withdrawals as you like.

New bonus accounts include ICICI Bank Hi-Save Bonus Saver at 1.25 per cent. The bonus is 0.6 percentage points, payable until September next year, after which your rate falls to 0.65 per cent.
Shawbrook Bank and French-owned RCI Bank both pay a slightly lower 1.2 per cent but, like Ulster Bank, there are no withdrawal restrictions or bonuses so you won’t have to move your money after 12 months if you don’t want to end up on a poor rate. 

Ford Money pays a slightly lower 1.12 per cent, but the bank guarantees that if it raises its rate, existing savers will benefit from the increase too.  Most providers will launch a new issue of their account to attract new savers, leaving loyal savers in older issues paying lower rates of interest.

On cash Isa accounts, Skipton BS’s new Cash Isa Plus pays 1.02 per cent, putting it among the top payers. But the rate includes a 0.27 percentage point bonus payable for the first 12 months. Your rate will drop to 0.75 per cent once you have been in the account for a year.

- New £20,000 Isa allowance - where to find the best savings rates

West Bromwich Building Society Websave Bonus Isa at a higher 1.05 per cent includes a 0.45-point bonus payable until 30 November 2018.  If you don’t switch out of the account once the bonus has been paid, you will earn just 0.55 per cent.  Meanwhile, Virgin Money’s Defined Access Cash Isa at a top rate of 1.06 per cent restricts you to three withdrawals a year. If you make any more, your rate tumbles to 0.25 per cent for the rest of the year.

Top buys where there are no withdrawal restrictions include Coventry BS Easy Access Isa at 1.05 per cent.  It is a flexible cash Isa which means you can take money out and replace it during the same tax year without affecting your £20,000 annual cash Isa allowance. 

- National Savings and Investments launches market-leading 2.2 savings bonds  

How to beat inflation

To beat inflation, currently running at 2.9 per cent, compromises need to be made as all of the small number of regular savings accounts that pay more than inflation require savers to have a current account with the provider. Our sister publication Moneywise regularly keeps tabs on the savings market and has found there are nine accounts that currently beat inflation.

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