A big shake-up in Isas this month should make them more attractive than ever.
The savings accounts already have the benefit of allowing you to earn tax-free interest on up to £20,000 each tax year. And according to the reforms introduced on April 6, they should be more flexible.
As Money Mail’s savings expert, I have spoken to all major savings providers to see how they are doing with the implementation of the new rules. But it is a bleak picture, as our table shows.
None of the 16 major savings providers have implemented all of these rules for their Isas. One major bank, Barclays, has not implemented any of the government’s three major changes.
Gone are the days when savers had to choose between an easy access Isa and a fixed term Isa.
New rules: With Isas you can earn tax-free interest on up to £20,000 each tax year. But under recent reforms they should now be more flexible
Under the latest HM Revenue & Customs rules, you can open as many as you like, as long as you don’t exceed your annual limit of £20,000.
The new rules will allow Isa savers to hold more than one with the same provider – or with more than one. That’s the theory.
But just over a week after the new rules came into effect, no major bank will allow you to open more than one Isa with them in a single tax year.
So if you open an easy-access Isa with them and they later launch a great fixed-rate deal, you won’t be able to take advantage of it.
Only Skipton Building Society, Nationwide, Paragon, Aldermore and Zopa offer this flexibility.
Several major providers won’t let you open an Isa if you’ve already opened one with a competitor this tax year.
Partial transfers are also allowed, so in theory you can move some of your money if you see a good deal and leave the rest where it is.
Of the sixteen providers I spoke to, only Skipton Building Society allows partial transfers to its Isas.
And that doesn’t help anyone, as no provider allows partial transfers. So if you’ve put money into Isa money this tax year and want to move it to get a better deal, you’ll have to move it all or nothing at all.
The new rules only apply to Isas in the current tax year; money from previous years can be transferred to as many accounts with as many providers as you want.
Insiders tell me that even if savings providers wanted to offer Isa customers the new flexibility allowed by HM Revenue & Customs, they wouldn’t be able to because they simply don’t have the back-end technology to support it.
This suggests it could take months for savers to fully benefit – and some providers may not implement the changes at all.
Nevertheless, most reassure me that they are working on this behind the scenes.
Some providers already allow a combination of fixed rate Isas and easy access Isas. That’s because when they originally launched their Isas, they structured them so that all Isa accounts count as one.
These providers are now in a strong position to offer savers the opportunity to mix and match.
These include Charter Savings Bank with its Mix and Match Isa, Zopa (Smart Isa), Paragon (Isa Wallet), Nationwide (Portfolio Cash Isa), Newcastle Building Society (CustomIsa) and Aldermore (MaximISA).
Hargreaves Lansdown’s savings platform offers the same flexibility, but the accounts offered are from external savings providers.
Unfortunately, all this means that savers have to do more homework to choose the best Isas. You’ll have to delve into the fine print first.
This is a great shame. Isa savers were promised a huge shake-up, with new changes announced to great fanfare last year.
But few will benefit – and savers will have to work harder to get the best deals.
The rules should ensure that Isas are no longer the poorer cousin of regular savings accounts. Savers should have no reason not to opt for the tax-free version now.
But with Isas in their current state, I fear that savers looking for flexibility will opt for regular savings accounts instead – and then be hit with a tax bill.
Zopa Bank lets you combine fixed rate Isas and easy-access Isas in its Smart Isa. A good choice if you like to open an account via app.
Shawbrook Bank pays the highest interest rate on bonds with a maturity of 4.76 percent, but is only available online. The bank will only let you open one of its Isa accounts this tax year.
Charter Savings Bank offers good rates and lets you open as many Isas online, both fixed rate and easy access, as you want. It pays 4.7 percent fixed for one year and 4.81 percent into its easy-access account. But you need £5,000 to open one.
Skipton Building Society is a good option if you want to run your account through a branch. This allows you to open both an easy-access Isa and a fixed rate Isa. The fixed interest rate is 4.5 percent for one year, but go elsewhere for your easy-access account.
Yorkshire Building Society’s one-year fixed rate Isa at 4.65 per cent is a good rate. But if you open one, you can’t open another with it this year.
Virgin Money: If you have your current account here, you can earn 5.05 per cent in the one-year fixed rate Isa. You can only open one cash Isa with the bank this tax year.
Sy.morris@dailymail.co.uk
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