AJ Bell’s Dodl app is offering 5.09% on cash Isa investors – is that a good deal?

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Customers of AJ Bell’s Dodl investment app can now earn sky-high Isa interest on cash.

Dodl offers 5.09 percent interest* on cash in the app for customers with an investment ISA or Lifetime ISA.

Although Dodl does not offer cash Isas or cash Lifetime Isas, it pays interest at 5.09 per cent on any money customers hold as cash and do not invest.

Customers receive the interest every quarter as a cash payment into their Isa or Lifetime Isa account.

AJ Bell says the move is part of a campaign to encourage savers to invest. The interest on cash balances is available to new and existing Dodl customers.

Launched in 2022, Dodl is much newer than the main AJ Bell platform and therefore has a smaller customer base.

The company is now looking for new clients who have large amounts of money that they are not yet investing.

According to the Financial Conduct Authority, in 2022, of those consumers with £10,000 or more of investable assets, 9.7 million UK adults had most or all of this in cash.

Of these, 4.2 million British adults said they were willing to take risk when investing. It is this group that Dodl wants to tap into.

Is the Dodl interest rate favorable?

When it comes to competitive savings rates from cash Isa, from Dodl* 5.09 percent comes close to the table top Plum’s Cash Isa* which pays 5.17 percent interest.

This is the preference of Simon Lambert of Money Chip’s cash Isa* by 5.1 per cent over Plum, as it is a flexible Isa that can help you avoid tax on easy savings. Meanwhile, Zopa offers a 5.08 percent cash Isa.

Dodl’s offering is not a cash Isa, however, and instead pays interest on money held in its Stocks and Shares Isa or Lifetime Isa accounts. Of course, Dodl customers also have the option to invest money held in the stock market, which is not the case with other savings accounts.

With a Lifetime Isa you can save up to £4,000 each tax year and receive a 25% government bonus.

from Dodl* 5.09 percent interest rate is better than the current best cash Lifetime Isa, which is offered by Piggy bank and pays a rate of 5 percent.

The Moneybox Lifetime Isa rate includes a fixed 1 per cent bonus for the first year and the underlying rate is 4 per cent.

There is no such time limit on the Dodl deal, but it is a floating rate that changes relative to the Bank of England base rate.

The base rate is expected to fall soon. Experts predict that the first cut will take place in August or September, so savers could see the Dodl rate fall.

Charlie Musson, Managing Director of AJ Bell, said: “By offering a market-leading interest rate on cash deposits through the Dodl app, we are giving customers the flexibility to save and invest in one place.

‘For novice investors, it offers the opportunity to build up a nest egg and start investing when they feel ready.’

Is Dodl FSCS protected?

All money you hold with Dodl is protected under the Financial Services Compensation Scheme.

The FSCS protects customers’ money up to £85,000 in the event the company goes bust.

Funds in Dodl’s investment ISA or Lifetime are held in 13 partner bank accounts. These are:

• Bank of Scotland
• Barclays
• Santander UK
• Lloyds Bank, Business Markets
• Close brothers
• Virgin money
• Investec Bank
• Lloyds Bank
• Royal Bank of Scotland
• HSBC bank
• National Bank of Qatar
• Cater Allen Limited
• NatWest Markets

It is not uncommon for companies that are not banks or building societies to rely on other institutions for FSCS cover.

AJ Bell’s Dodl app relies on these 13 banks for its FSCS protection. Customers’ money is pooled and split across 13 banks, with a maximum of 35 percent at any one bank.

Three of the 13 banks – Close Brothers, Investec Bank and Virgin Money – have a 15 percent limit, while the rest have a 35 percent limit.

Savers should be aware that there is no separate cover limit for customers’ money protected under the FSCS. A customer does not know which of the 13 banks will be used for FSCS protection of their money when opening a Dodl.

This means that if a customer puts £20,000 into a Dodl Isa and holds it with Barclays, and that saver already has more than £65,000 with Barclays Direct, the amount above that will be unprotected.

A customer would need to have more than £240,000 in cash at AJ Bell to have any chance of reaching the £85,000 limit at either bank just because of the money on Dodl – due to the maximum limit of 35 per cent of money deposited at any bank.

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