UK savers have £292 billion in cash Isas and more than half of that sum is in accounts held at the big banks. Yet, they pay less than smaller rivals. We pinpoint the best savings rates and star buys.
The UK’s biggest banks paid as little as 20p in interest on every £100 saved by cash Isa holders last year. Our analysis of the interest paid by the large banks and building societies reveals just how tight-fisted they are with loyal savers.
Among the worst of the 60-plus easy access cash Isas from big banks and building societies are Halifax’s Instant Isa Saver and Santander’s Easy Saver. Both paid just £40 in interest to savers who had the full annual Isa allowance of £20,000 in their cash Isas for the whole of 2019. That’s a derisory £2 interest on each £1,000, or 0.2%.
NatWest joins them in the bottom three. It paid just 0.2% on balances below £10,000. The worst 20 cash Isas last year paid out less than £5 interest on each £1,000.
Savers in Lloyds’ Instant Cash Isa and Bank of Scotland’s Isa Saver, where rates were cut from a poor 0.35% to an even worse 0.2% in September, saw a return of £3.05 in 2019. Next year, at the reduced rate, they are in line for £2 on each £1,000.
Savers have £292 billion of savings in cash Isas. More than half – £152 billion – is sitting in accounts run by the big banks: Barclays, Lloyds, Halifax, Bank of Scotland, HSBC, RBS, NatWest, Santander, TSB and Virgin Money. They pay far less than some of their smaller competitors.
Halifax’s Instant Isa Saver, which paid 0.2% last year, will cut its rate to 0.1% in February. NatWest pays 0.2% on balances up to £10,000. Only savers with at least £50,000 in their account earn a more competitive 0.85%. Nationwide has a host of old accounts paying just 0.3%. Virgin pays 0.25%, or 0.5% to loyal savers in its Easy Access Cash Isa.
By switching to a better deal, you can more than quadruple your tax-free interest and have the satisfaction of knowing you are no longer being ripped off by your old provider. By moving to online bank Cynergy Bank’s Online Isa, which pays 1.31%, you can up your interest from as little as £40 to £262 a year on your £20,000 Isa allowance.
You can switch to a better deal even if you want to stick to the high street, although not all providers will accept transfers. Among those that will are The Family Building Society, which pays 1.23%, Kent Reliance, 1.15%, Teachers Building Society, 1.1%, and both Coventry and Newcastle building societies, 0.9%.
Ask your newly chosen provider to arrange the transfer for you. It should take no longer than seven days to complete. Don’t do it yourself, or you could lose the tax relief.
✰ Marcus by Goldman Sachs: 1.35%, minimum £1, online account.
✰ Ford Money Flexible Saver: 1.35%, minimum £1, online account.
✰ Cynergy Bank Online Isa: 1.31%, no bonus mini- mum £1, online account.
✰ Ford Money Flexible Cash Isa: 1.27%, no bonus, minimum £1 online account.
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