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This week has seen a rash of Isa launches from banks and building societies keen to attract savers looking to use their allowance before the end of the tax year. Although savings rates have been plummeting it is still possible to earn more than 3% on an Isa if you head to one of the best buys listed below. If you hold an Isa from previous years it is worth checking what rate you are getting and switching if appropriate.
Remember, cash Isas allow savers to put away up to £3,600 a year and the interest paid is not taxed at source, as happens with other savings accounts. They make good sense for all taxpayers but are a must for higher-rate taxpayers.
Top paying cash Isa (no transfers in)
Barclays raced to the top of the best-buy tables this week after it launched its Golden Isa paying 3.61%. It marginally beats the RBS/NatWest Cash Isa Plus, which pays 3.51%. The Barclays product is available to new and existing customers and can be opened with a minimum deposit of £1. To qualify for the current tax year the account must be opened by 5 April, or from 6 April for the 2009/10 tax year. The 3.61% rate includes a 1% bonus guaranteed for 12 months. Unfortunately, Barclays has chosen to not allow customers to transfer in existing Isa funds from another provider.
New and existing customers can open their Golden Isa instantly at a branch. Barclays current account customers can also apply online or by telephone on 0800 49 49 49. Many branches will be open for longer over the weekend beginning 4 April to coincide with the end of the tax year. It is worth noting that Barclays has had huge problems with its best-buy Isas in recent years after being swamped by demand, although it says it has left those problems in the past.
Top paying cash Isa (allowing transfers)
There are two providers worth considering if you have money to move from an existing cash Isa: NatWest and HSBC/Marks & Spencer Financial Services. NatWest's Isa pays 3.25% on balances up to £9,999 and 3.51% on balances of £10,000 and over. You have to bank with NatWest or open a separate e-savings account to qualify, but a £1 eSaver account will do. You can also apply online. If you are transferring money from another provider you have to fill in the form online, print it off and take it to your local branch, or send it to NatWest HQ. There are no penalties for withdrawing your money at a later date.
M&S's Advantage Cash Isa is a much more straightforward affair. It pays a bit less – 3.1% – which includes a 1% bonus payable until 21 April 2010. After that the rate reverts to 2.1%. There are no qualifying accounts and you can take out your money at any time. There is a minimum investment of £100 and the company, which is owned by HSBC, is allowing transfers in from other providers. Cruelly, existing M&S Isa customers are not allowed to transfer their Isa into this product. Further details are available on the M&S website.
Best fixed-rate Isa
Given that interest rates are at historically low levels and the Bank of England base rate is almost as close to 0% as it can get, it probably doesn't make sense fixing your Isa rate for much more than a year (if at all). Halifax has a four-year, fixed-rate Isa paying 3.35%, but if interest rates race away in two years' time that will look like a bad decision.
The Bank of Cyprus this week launched its Isa with a fixed rate of 3.2% until 5 April 2010, providing your lump sum is invested by 3 April for this tax year, and between 6 April and 30 April for the 2009/10 year. Transfers in are allowed, but before you commit it is worth noting that only 90% of the first €20,000 (£18,500) savings in Cyprus banks are covered by the Central Bank of Cyprus deposit protection scheme. Deposits in excess of this amount will be protected under the UK's Financial Services Compensation Scheme, up to £50,000.
A better bet for cautious savers is HSBC's one-year fixed-rate Isa paying 3.1% – the same as its stablemate M&S product. It doesn't allow you to transfer in any existing savings accounts. Rather bizarrely, First Direct, HSBC's internet division, is offering the same rate for one year, but does allow transfers.
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