Savings rates are low at the moment as the Bank of England keeps the base rate at 0.1 percent and retail banks struggle to offer anything near the one percent mark. Indeed, Moneyfacts.co.uk examined average savings rates today and they have dropped to unprecedented levels.
“Our new accounts offer a great opportunity for customers to take a longer-term view with their cash savings at a competitive interest rate.”
According to recent data from HMRC, savers are favouring ISAs at the moment even as the interest rates on offer struggle.
HMRC recently detailed cash ISAs attracted 1.2 million more savers in 2019-20, as an increasing number of people ignored low rates to put money away.
In total, £9.7million was put into cash ISAs in the previous tax year, up from £8.5million the year before.
“But in a time of uncertainty, the familiarity of the brand seems to trump both these concerns.
“If you’re one of the millions of people putting money into a cash ISA, you need to make sure it’s as rewarding as possible – particularly as you can only put money into one each year.
“First, carefully consider how accessible you need the cash to be. The longer you can lock the money away for, the more interest you will get. You can also frequently transfer any existing ISAs you have into the new, hopefully better paying, account once you’ve found it.
“Second, be honest about whether cash ISAs are for you at all. Smaller deposits can earn far more in products like high-interest current accounts or regular savers. If growth, rather than certainty, is your goal – take a look at stocks and shares ISAs too.
“There’s more risk with these, but there’s also the chance you could make far larger returns – especially if you’re prepared to leave the money alone for a few years.
“Finally, if all you’re doing is putting money away for a rainy day, Premium Bonds might be worth a flutter.
“Your money’s safe, you can get it back within a week or so if needed, and there’s a chance you could win £1million tax free. Most people don’t, of course, and many win nothing at all, but with the interest on cash some easy-access cash ISAs sitting at 0.01 percent – and even the best-payers only offering 0.46 percent – that’s a lot less of a problem than it once was.”