Topping up your Cash ISA could cost you dearly

26th March 2014

As we near the end of the current tax year, we expect the usual rush of savers looking to maximise this years’ ISA allowance. However choosing the wrong account could cost savers over time as some existing ISAs pay derisory rates of interest.  

The ISA Hall of Shame includes well known providers such as TSB which has an ISA, formerly from C&G and now closed to new savers, which pays a shocking 0.05%! Or Halifax’s closed Variable Rate ISA Saver which pays just 0.10% on £1, 0.13% on £21,000 up to just 0.20% on £27,000 plus, to its existing savers.  And they’re not alone. With over 14% of all variable rate Cash ISAs paying 0.50% or less it’s still vital to check the rate you are on.

Traditionally those accounts, now closed to new customers, pay some of the worst returns on the market and this is still the case for many savers as interest rates have plummeted in recent years.That said, in these unusual times as best buy rates have also tumbled, some savers may in fact be lucky enough to hold accounts now paying well over and above the best rates currently available. Better still some of these accounts still allow funds to be added.

The ISA Hall of Fame includes the Buckinghamshire Building Society 180 Day Notice Monthly Income Variable Rate Cash ISA (what a mouthful) paying 2.82% tax free, or its Gold Rush 120 Day Notice ISA paying a whopping 3.32% tax free (on a minimum of £50,000) for its existing savers.

And surprisingly a high street provider, Barclays’ Freestyle Cash ISA pays a great rate of 2.76% tax free.

But I’m afraid these are now closed accounts, so new ones can’t be opened. You’ll only benefit if you already hold one.

With almost 28% of all variable rate Cash ISAs paying over the current best buy rate of 1.85%, you could be better off staying put.

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