Interest rates on Cash ISAs are on the rise, but savers should “act quickly” to draw on the benefits before the tax year ends, an expert has said.
There are currently 1,597 savings accounts beating inflation, and Individual Savings Accounts (ISAs) are making up their fair share, research by Moneyfactscompare shows.
Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: “In the run-up to ISA season, Cash ISAs have seen rate increases across the board.
“Savers who have not yet made the most out of their tax-free savings would be sensible to ensure that they use any remaining balances, otherwise they may lose out.”
People aged 18 or over can save up to £20,000 in an ISA every tax year without paying tax on interest generated from the balance.
However, any unused allowance in the tax year will be lost, as unused allowance cannot be rolled over into the next tax period. This makes it key for savers to “make the most” of their tax-free allowances if they’ll benefit from the tax advantages that ISAs offer.
Ms Eastell continued: “Easy access ISAs pay as much as 5%, which is positive news for those looking to maximise their returns in the short term.”
Easy access accounts are typically more flexible, allowing savers to make payments and withdrawals with minimal restrictions and small opening deposit requirements.
Top easy access Cash ISAs
At the time of writing, Trading 212 tops the list of easy access ISAs with an Annual Equivalent Rate (AER) of 5.10%. The rate includes a .015% bonus for 12 months and interest is paid monthly.
Savings app Plum is also offering a competitive AER of 5.06%.The full rate, which includes a 1.25% bonus for 12 months, is paid on a minimum balance of £100 and interest is applied monthly.
Moneybox places just behind with an AER of 5%. The full rate, which includes a 0.55% bonus for 12 months, is paid on a minimum balance of £500 and interest is paid on the anniversary of opening.
Top fixed rate Cash ISAs
Ms Eastell pointed out that savers could feel locking away their cash would be a more “appealing option”, especially as there are expectations for the Bank of England to central reduce interest rates next month.
This will typically have a knock-on effect on savings deals. If central interest rates fall, interest rates on savings offered on savings accounts follow suit.
Fixed-rate accounts enable savers to lock in an interest rate for a set length of time but typically come with additional restrictions, such as a limit on withdrawals.
In the fixed rate sector, Castle Trust Bank is topping the list for one-year accounts with an AER of 4.55%. A minimum deposit of £1,000 is required to launch the account and interest is paid on maturity.
Castle Trust bank is also topping the list for two-year fixed rate ISAs with an AER of 4.45%. A £1,000 deposit is required to open the account and interest is paid on maturity.
For longer-term savers, Hodge Bank is offering the top rates for three, four and five-year fixed ISAs with AERs of 4.41%, 4.05%, and 4.22%, respectively. Depending on the account, savers need between £1,000 to £5,000 to launch and interest is paid on the anniversary.
Ms Eastell said: “To avoid disappointment, savers would be wise to secure any enticing deals before they disappear.”
She added: “If consumers are unsure which account is best suited to their needs, they should seek independent advice in the first instance and carefully consider any opening restrictions.”
