Plum is offering the market-leading deal for easy access Cash ISAs with its product boasting a 5.18% interest rate – but it comes with catches, an expert has said.
Cash ISAs have grown in popularity over the past few years as higher interest rates continue to drag more people into savings tax thresholds. These accounts allow people to save up to £20,000 a year tax-free.
Savers can launch Plum’s easy access ISA with a £100 deposit and interest is paid monthly. The interest rate includes a 1.39% bonus for 12 months, after which the rate will drop to 3.79%.
Average easy access ISA rates have fallen month-on-month to 3.24% according to new data from Moneyfactscompare, making Plum’s deal notably more competitive for savers seeking higher returns.
Kevin Mountford, savings expert at Co-founder of Raisin UK, told Express.co.uk : “Clearly as interest rates have increased and savers risk breaching tax allowance limits, ISAs are again increasing in popularity and within the variable rate area there is a real battle to secure our cash.”
While Plum’s 5.18% deal currently “pays the highest rate” for easy access Cash ISAs, Mr Mountford noted: “It comes with catches.”
He explained: “Firstly Plum isn’t a bank so any deposits will reside with either Citi or Lloyds and whilst deposits placed with Plum will be protected by FSCS up to £85,000, applicants will need to check if they already hold savings accounts with these two banks.”
The savings expert said it is also worth noting that the 5.18% includes a one year bonus of 1.39%, so it’s worth accountholders reviewing after 12 months.
Mr Mountford continued: “You are limited to three withdrawals a year and whilst ideally you should not take money out of an ISA account, if you exceed three withdrawals the rate drops to 2.5%.”
However, he noted: “It is good that Plum allows ‘transfers’ from other accounts, but again any money moved to Plum from an existing ISA provider will only attract 3.79%.
“Overall the various terms and conditions means that the account can be confusing and no doubt some savers will get caught out, but if you can stick to the rules then it is worth considering.
“More generally most savers could earn more interest by checking out the market options. The annual ISA allowance remains at £20,000 so if someone has more cash to deposit there are still excellent non ISA savings rates available.”
Rachel Springall, finance expert at Moneyfactscompare.co.uk, described the table-topping deal as “encouraging to see”.
She added that those unfamiliar with Plum will find that they need to open the account through a mobile app, but once they do. the account is “quick and easy to manage”.
Listing a few more favourable perks, Ms Springall continued: “Savers can make regular payments into their pot, but in addition, Plum offers savers a top-up pocket that sits alongside their savings account which connects to a current account to make regular deposits on behalf of a customer.
“This is a great feature for those who want to save something each week but just don’t have the time to do so. This cash can easily be moved into the Cash ISA, or if its needed, back into someone’s current account.”
Victor Trokoudes, CEO and founder of Plum said: “Our goal has always been to give customers the best tools we can to grow their money for life. It’s essential that people make sure their savings are working as hard as possible.”
The three deals placing just behind Plum in the easy access Cash ISA top tables, each with varying conditions, include at the time of writing:
- Moneybox – 5.17% AER / gross
- Trading 212 – 4.90% AER / 4.78% gross
- Monument Bank – 4.76% AER / 4.66% gross.
A full list of top interest-paying savings accounts and Cash ISAs in December can be found here.
