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Savers should take full advantage of their £3,600 tax-free allowance as the latest batch of Isas are launched
Banks and building societies have launched a gaggle of cash Isas to persuade savers to use their £3,600 allowance as the new tax year begins.
Research from Barclays Stockbrokers reveals that 85% of investors plan to invest in an Isa this tax year, and although interest rates are low it is worth using your annual allowance if you can.
"The early days of this tax year are likely to become a mini-battleground as more people get in early on cash Isas," says Kevin Mountfield, head of banking at Moneysupermarket.com.
"The majority of offerings available at the end of the last tax year are still likely to be popular now. But savings play a huge part in terms of retail banking, and if there is demand banks are likely to provide further packages for savers."
However, access for millions of savers with a National Savings & Investment Isa has become more limited – these accounts can no longer be operated through Post Office branches. Its cash Isa currently pays a variable rate of 0.5% on all deposits, but remains popular with savers because accounts are fully guaranteed by the Treasury.
To welcome in the new tax year, which began on 6 April, several providers are already offering competitive accounts. • Barclays is paying 3.55% on its Golden Isa and includes a 1% bonus for 12 months. The account, which does not accept transfers in, is operated in-branch or by telephone and savers can get instant access to their money if they want to make a withdrawal without penalty.
• Alliance & Leicester's Isa, which is fixed at 3% for one year, matures on 1 May 2010. The minimum deposit is £500 and transfers from existing Isas are allowed, but any withdrawals from the account incur a penalty of 60 days' interest.
• Principality building society is offering tiered fixed-rate Isas with interest rates ranging from 3.3% for a £3,600 lump sum with no transfers in, to 2.85% for the same sum with transfers in permitted. It is also paying a fixed rate of 5% until 5 April 2010 on its Regular Saver Isa. Savers must deposit between £20 and £300 a month and can make a lump sum payment to top up their Isa to the full £3,600 allowance between 1 March and 5 April. If access is required or a payment is missed the account reverts to the rate of its cash Isa, which currently pays 0.6%.
• First Direct is offering current account customers a fixed rate of 7% on its Regular Saver Isa. The rate is fixed for one year and savers can invest between £25 and £300 a month. If the saver withdraws money during the term or misses a payment the rate reverts to its cash e-Isa, now paying 3.06%.
• Royal Bank of Scotland is paying a variable rate – currently 3.51% – on its Cash Isa Plus, and the rate is guaranteed to be no lower than base rate until 1 February 2010. To qualify for the account, savers must hold or open an instant access savings account or a current account with RBS. Existing Royalties Gold, Royalties Premier and Royalties Private customers also receive an additional 0.5% interest. Transfers in are not permitted.
• NatWest's e-Isa is paying 3.2% on balances up to £10,000 and 3.45% on balances over £10,000. No notice is required to make a withdrawal, but all money must be transferred to a NatWest instant access account.
• Leeds building society's Isa is paying a fixed rate of 3.5% for five years. The account can be operated in-branch or by post, and transfers in are permitted. Savers can withdraw up to 25% of their money without penalty, but further withdrawals are subject to a 180-day loss of interest.
Source: Defaqto.com and moneyfacts.co.uk
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