There is unlikely to be cash Isa season, experts have suggested as banks cut their interest rates.
Savers are set to be disappointed by the cash Isa rates on offer as we approach the end of the tax year. Experts have warned that there is unlikely to be a proper cash Isa season this year, with some big banks instead opting to cut their rates.
Between February and April, banks usually launch new accounts with top rates to attract last-minute savers keen to use up their annual tax-free Isa allowance before the tax-year end on 5 April, or early birds looking to stash their new allowance as soon as possible after the reset. But this year none of the big providers, including Barclays, Halifax, Lloyds, Nationwide, NatWest, HSBC and RBS, plan to offer new deals. Instead, three big banks – Co-op Bank, NatWest and RBS – have announced cuts on their easy access cash Isa interest rates.
You have until 5 April to use your £20,000 cash Isa allowance for this tax year. If you don’t use it, you lose it, as you cannot carry it over. You will get another £20,000 allowance on 6 April to use by 5 April 2021.
The big banks are awash with cash, so there is no point in them paying higher rates. A knock-on effect is that smaller banks and building societies can get away with paying less too.
Anna Bowes, director at Savings Champion, says: “Rates in general are falling and Isa savers will be victims of these cuts. There is no sign of an Isa season yet, and it is unlikely that one will emerge.”
Kevin Mountford, chief executive at savings platform Raisin UK, says: “Big banks take advantage of savers’ inertia. Savers should look to maximise their returns both on this year’s Isa money and on cash Isas they already hold.”
The big banks hold £152 billion of our cash Isa money, more than half of the £293 billion total. However, NatWest and RBS cut rates to both new and existing customers in February, while Co-op Bank says that it has taken the “difficult” decision to cut its rates from 22 April. The Co-op Cash Isa’s rate will tumble from 0.56% to a lowly 0.25% for all savers.
NatWest and RBS hit loyal customers by cutting rates on larger holdings where savers have built up Isa balances over the years. The NatWest rates have fallen to 0.5% on balances of between £25,000 and £50,000, and 0.75% on higher amounts. The bank already pays a pittance on smaller sums: 0.2% on up to £10,000 and 0.35% on up to £25,000.
Meanwhile, rates on National Savings & Investments accounts and bonds will be cut from 1 May, and the chances of winning a premium bond prize will be lowered.
Marcus by Goldman Sachs: 1.35%, minimum £1, online account, no bonus or withdrawal restrictions.
Cynergy Bank Online Isa: 1.29%, no bonus, minimum £1, online account.
Ford Money Flexible Cash Isa: 1.27%, no bonus, minimum £1, online account.