🔔 Deposits into cash ISAs increase tenfold - what are the best cash ISAs to pick?

According to recent figures from the Bank of England, the amount held in cash ISAs in January this year was £1.1bn higher than the month before. In January 2018, the increase was just £103m.

The value of the cash ISA has been regularly called into question since the introduction of the Personal Savings Allowance in April 2016.

However, these new statistics from the Bank of England show that attitudes seem to be changing.

Cash ISAs are clearly increasing in popularity again, perhaps due to the uncertainty surrounding Brexit - prompting people to move from the stock markets, into cash. 

Of course, it is always important to take advice before making such a move and just as important is to choose the best cash savings accounts if and when you do. It would be a waste to simply leave the money moribund with a high street bank, earning a pittance.

The last time savers were pouring as much into cash ISAs as they are today was just before the Personal Savings Allowance (PSA) was introduced. At the time, the Government announced that 95% of savers would no longer pay tax on their savings accounts, as the interest they earned would be less than the PSA of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.

However, as savings rates across the board have improved and the amount of money people are holding in cash increases, this percentage is likely to be much lower - as more savers breach the PSA. Thus, the interest in cash ISAs again – in more than one way!!

Best buy rates across the board have been on the up for some time now and it's no different amongst cash ISAs. Over the last year, the top easy access cash ISA rate available has increased by 15% and now the best rates on easy access cash ISAs are similar to those on standard savings accounts – the gap has disappeared.

But what are the best accounts available?

You will earn more interest if you tie your money up but there is still a gap between the best fixed rate cash ISAs and equivalent non-ISA accounts. This said, if you pay tax on your savings outside an ISA, you will still be better off protecting your cash in this valuable tax-free account.

Easy access cash ISAs

The best easy access cash ISA currently available is with Santander – but is only available to those who hold or open a 1|2|3 current account with the provider. This current account does pay interest of 1.50% AER and offers cashback – but there is a monthly fee, so it’s important to check the current account is right for you before taking the plunge. Don’t let the incentive tail wag the current account dog!

And there are other cash ISAs that offer very similar rates – although once again it’s important to be aware of the T&Cs.

For example, Yorkshire Building Society is paying the next best rate of 1.46% tax free/AER – but, as the name suggests, access is only allowed on a single day in the first 12 months and after that initial period, the account will be switched to the lower paying Triple Access Saver ISA – currently paying 0.90% tax free/AER.

Similarly, Virgin Money’s Double Take E-ISA Issue 5 is paying 1.45% tax free/AER but again allows limited access – in this case just two withdrawals per year.

Therefore, the ISA that could be appropriate for more savers is the Paragon Limited edition easy access cash ISA Issue 5. It also pays 1.45% tax free/AER but there are no restrictions on withdrawals. There is also no maturity date or bonus to remember.

For more details about these and more easy access cash ISAs, take a look at our best buy tables.

>> Top-paying variable rate cash ISAs

Fixed rate cash ISAs

As mentioned above, if you can tie up your cash, you can earn a little more interest. For example, the top 12 month fixed rate cash ISA is offered by OakNorth – paying 1.78% tax free/AER, followed closely by Shawbrook Bank’s 1 Year Fixed Rate Cash ISA Bond Issue 30, which is paying 1.77% tax free/AER.

Over two and three years, Charter Savings Bank is offering the market-leading offerings – paying 1.95% tax free/AER and 2.05% tax free/AER respectively, on balances of £5,000 plus.

And the top fixed cash ISA rate currently available is 2.30% tax free/AER – Shawbrook Bank and United Trust Bank are both offering this rate on their five year fixed term cash ISAs.

Once again, look at our best buy tables for more information about how to open and manage these accounts – and the other best buys available.

>> Top-paying fixed rate cash ISAs

All of the cash ISAs mentioned above will accept transfers in of other cash ISAs and most - but not all - will accept transfers in from stocks and shares ISAs.

Further to a request from one of our customers, we have recently added a new section to our best buy tables to indicate which providers will accept transfers from stocks and shares ISAs, as well as cash ISAs.

If you need any further help with finding the accounts that are most suitable for your needs, please call us on 0800 011 9705 to speak to one of our expert savings specialists. If you are considering whether to switch from a stocks and shares ISA into cash, we can also point you in the direction of someone who can help. So, give Claire or Leighton a call.

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