🔔 Big guns enter the ISA fray

Santander and Coventry Building Society jostle for top spot in the easy access cash ISA table

Coventry Building Society has launched a joint market-leading easy access cash ISA, hot on the heels of high street behemoth Santander.

Both ISAs are paying 1.50% tax free/AER - although the Santander cash ISA is only available to new and existing 1|2|3 World or Santander Select customers.

This new offering from Coventry Building Society is available to anyone and can be opened with a minimum of £1, although it does have to be opened online and the rate includes an introductory bonus of 0.35%, which is paid until 31 July 2020 - after which the rate will drop accordingly.

When large high street banks like Santander and one of the biggest building societies in the UK start to offer competitive ISA rates, you can be sure that the ISA season – the time of the year when traditionally providers up their ISA game - is well and truly under way.

From around this time of year, until the end of the tax year, providers often improve their ISA offerings to try and encourage those savers who are yet to use their ISA allowance to open an account with them. ISA season then carries on into the new tax year, to catch the early birds that aim to make the most of their ISA allowance by depositing money at the first opportunity.

Having said that, there has been strong competition in the best buy ISA market generally over the last couple of years – even outside the traditional ISA season - and cash ISA rates have increased more rapidly than their non-ISA equivalents – in particular fixed rate accounts.

While best buy fixed rate ISAs still pay lower rates of interest (before the deduction of any tax due) than is available among fixed rate bonds, the gap has narrowed. This means that anyone who is already using up their Personal Savings Allowance (PSA) - and therefore paying tax on some of their savings interest - could earn more once again by sheltering some cash in an ISA.

>> More information on the Personal Savings Allowance

The introduction of the PSA and the gap between the top rates available on cash ISAs and standard savings accounts have perhaps meant that cash ISAs have been less popular among savers and providers alike since the introduction of the PSA in 2016.

However, moves like this have started to hint at the prospect of a more encouraging ISA season this time around and could be just the thing for those who are yet to use their ISA allowance or indeed are looking to switch from an existing cash ISA that is not paying a competitive rate of return.

And, as a result of the big guns’ improvements this week, the best easy access ISAs are paying the same rate as the non cash ISA easy access accounts, so it makes sense to at least consider the tax-free option, which will remain tax efficient in the future, regardless of how much the interest grows to.

If you need any help finding a savings account that suits your own particular circumstances and plans, please contact us on 0800 011 9705 or email [email protected].

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