ISA season in full swing

Author: Anna Bowes
05th March 2012

Santander saves the best till last and ISA transfers are back in fashion

Not to be outdone by its competitors, Santander has stormed the ISA market today with a selection of market leading Cash ISAs, throwing down the gauntlet to the other major Cash ISA players.

Many of these key players have chosen different routes this ISA season. Barclays seems to be taking a back seat with its offering of 3.05% AER, leaving it at the bottom end of the variable rate best buys and unlikely to battle it out with Santander. Nationwide appears to be using Cheshire Building Society (owned by Nationwide) to drive ISA money with its previous market leading variable rate ISA paying 3.16% AER and Halifax looks to be moving its focus to its Junior ISA, offering up to 6%, along with its long term fixed rates paying up to 4.50% for 5 years.                    

Santander on the other hand is focusing on the fun factor (otherwise known as a publicity stunt) with its new Major ISA account.  A market leading 2 Year Fixed Rate ISA paying 4% AER which comes with an additional 0.10% bonus if Rory McIlroy wins an eligible golf “major”.  Even without the bonus, the account hits the top spot so is still well worth a look - and if you get the extra bonus, all the better!

Added to that, Santander’s new Direct ISA Issue 9, pays a market leading 3.30% AER but it does come with a hefty bonus - a Santander staple - of 2.80% for the first 12 months, so don't forget to sign up for our free Rate Tracker service and we'll remind you when the bonus is about to end. The best bit of news however is that all these new rates from Santander allow transfers in from previous ISA subscriptions.

One of the most encouraging things this ISA season is the number of accounts which accept transfers in from previous years' ISA subscriptions. Traditionally the ISA season sees some of the best ISA rates on the market, as providers battle it out for ISA money.  However many of the best buys have usually only been available for new ISA subscriptions, leaving those who had amassed large sums in ISAs missing out on some of the best rates.  Not this year however, so great news for the ISA savers, old and new.

With interest rates remaining at an all-time low, ISAs continue to play a vital part of any tax paying savers portfolio.  And given that savers who have been investing the full amount each tax year since ISAs commenced back in 1999, could have a total pot of around £54,000, it’s great news that they can benefit from the market leading rates available. *

* Figures are based on the maximum amount being invested as soon as possible each year and earning a rate equivalent to the Bank of England Base Rate.

ISA Tracker launched

As many of the best rates come with large bonuses, it remains important for savers to set a reminder when the bonus rate falls away, to ensure they continue to get the best from their savings.  And for those who easily forget there’s our new free ISA Tracker Service, tailored specially for ISA savers. Registered users will receive a reminder when their bonus expires, or account is due to mature, and an alert if their rate changes. In addition we’ll provide details of the best rates available from the whole market at that time.

Rundown of ISA changes in recent weeks:

Halifax has today issued a release claiming to unveil headline rates for the ISA season.  However the title sounds a lot more interesting than the offers themselves.  The variable rate ISAs offer 2.75% standard and 3.00% for the online only version.  The fixed rates range from 1 to 5 years with the 5 year paying the market leading rate of 4.50% AER.  The other terms are slightly less appealing paying 2.25% AER for 1 year, 3.70% for 2 years, 4% for 3 years and 4.20% for 4 years.

Santander got the ball rolling this morning with the launch of its Major ISA (as mentioned above) offering 4% AER fixed for 2 years, with a 0.10% bonus if Rory McIlroy wins an eligible golf major.  It has also added a market leading 1 year fixed rate ISA to its range paying 3.50% AER, along with its Direct ISA issue 9 paying 3.30% AER.  Direct ISA offers easy access for withdrawals and comes with a 2.80% bonus for the first 12 months.

Cheshire Building Society jumped to the No1 spot for a mere 3 days (before Santander pipped them at the post) with an increase to the rate on its Direct Cash ISA Issue 1 from 3.06% to 3.16% AER on Friday.  Cheshire Building Society also launched a top rate fixed rate ISA – Direct Fixed Rate ISA Issue 2 – paying a very competitive rate of 3.75% for 18 months on £1,000 plus.

Barclays showed its hand last week with the launch of its variable rate Loyalty Reward ISA but it’s nothing special. At 3.05% AER there are better rates to be found and you have to hold a Barclays current account or have £500+ in a Barclay’s savings account to qualify.  The Barclays ISA Saver Issue 2 (not just for existing customers) is even less enthralling – even though the new Issue 2 is an improvement on Issue 1, it’s paying just 2.75% and this includes a 1% bonus for 12 months.

Lloyds’ offering is even more disappointing.  Also launched last week, the variable rate Cash ISA Saver paying just 2.65% which certainly doesn’t make it in to the best buy tables. And that rate includes a bonus of 1.65% for 18 months. Lloyds also launched a new Fixed Rate Cash ISA paying up to 3.70% for 2 years.

Previous weeks saw Nationwide kick things off with the launch of Online ISA, paying 3.10% AER. The account is slightly unusual as it’s fixed for 18 months and allows penalty instant access for any withdrawals.  However it does come with a fixed bonus of 2.10% until 30 September 2013.  You also have to have a Nationwide card based account to open this ISA, however you can open the FlexAccount with as a little as just £1.

Hot on the heels of Nationwide was Aldermore Bank which propelled itself to the top of the variable rate ISA best buys at the time of launch with its 60 Day Notice Cash ISA, paying 3.15% gross/AER, or for monthly interest you can earn 3.11% gross.  Although there is no bonus included in the rate, you do have to give 60 days’ notice for any withdrawals or forfeit 60 days interest for instant access.  The minimum opening balance is £1,000 and comes with an interest rate guaranteed to be at least 1.75% above Bank of England Base Rate until 1 March 2013. 

Halifax, in its own words, aimed at injecting a dose of competition into the kids tax free savings market with the launch of its Junior ISA paying up to 6%. They offer JISA savers 3% AER however for any parents who also have their own ISA with Halifax, they would increase the rate to 6%.  A clear headline grabbing rate. 

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