As providers start to prepare themselves for the traditional ‘ISA season’ (usually running from late February through to May) we have seen a few changes to the ISAs available to open already this month.
This week, Santander announced 3 new ISAs to be launched on Monday 10th March. 123 current account, 123 credit card or Santander Select customers are to be rewarded with a market leading 2 year fixed rate ISA at 2.30%, whilst everyone else will be offered a competitive 2% for 2 years.
Whilst access to the top rate is restricted to a select group, it has to be said that the 123 current account in particular offers a highly competitive rate of 3% AER on balances between £3,000 and £20,000. So you could have a market leading rate for your ISA and for some of your easy access money at the same time.
Disapointingly, the variable rate Direct ISA Saver is only paying 1% which is significantly lower than the current best buy rates, but this is hardly a surprise in a category that has been neglected by providers in recent times.
The first ‘big’ provider to launch a new ISA was HSBC, with the launch of its new Loyalty Cash ISA, for its existing customers. HSBC Premier Customers will receive 1.59% tax free/1.60% AER, HSBC Advance Customers will receive 1.49% tax free/1.50% AER and other HSBC current account holders will receive 1.39% tax free/1.40% AER. The rates will revert to 0.49% tax free/0.50% AER 12 months after the last payment into the account. The account will continue to earn the lower rate of interest until a further payment is made.
It has to be said that better rates are already available among variable rate cash ISAs and it is restricted to existing HSBC customers only.
On the surface the rate is fairly competitive for a high street provider, but it’s not without restriction and complication which is a growing concern given that savings are supposed to be simple.
We commend any provider that encourages savers to save and that’s exactly what this account does, however, the rates drop considerably each year if savers don’t comply with the rules and top up for the next tax year, so many savers could be left in the lurch with money languishing at just 0.50%. Is this not just a conditional bonus by another name?
The next big provider to make changes to its ISA range was Nationwide and whilst the rates did not change (ranging from 1.50% to 1.75%) from what they already had available, the removal of an introductory bonus as part of the rate is certainly welcome.
As with all ISAs and savings accounts in general, it’s important to check the terms and conditions and ensure the account is right for your needs and switch if it’s not offering the best returns. Even in these exceptional times, when interest rates are at record low levels, it’s important to get the best rate you can and if possible keep all the interest in your pocket and out of the tax man's
We will wait with baited breath to see what happens in the coming weeks and if key players such as Halifax react and launch a new ISA but in the meantime we will keep you up to date via our Rate Alerts.