Save your savings! If you have money in an Isa, you need to be aware of this new sneaky banking trick, reveals savings guru SYLVIA MORRIS. This is what you need to do…
If you’re one of the savvy savers who put money into their Isas this time last year, you should beware.
Hundreds of thousands of savers started last year on an excellent footing, depositing a whopping £3 billion into cash Isas – up from £1.7 billion the previous January.
Savers were tempted by the plethora of eye-catching Isa cash offers and decided to put money into them. Many moved their money from regular accounts to Isas to avoid a tax bill on their interest.
But some of these top rates are now being reduced. If you don’t stay alert, you could find that the excellent rate you got around 5% last January is now paying you around 1%.
It’s important to check your rate regularly, but it’s imperative to do so after a year as many accounts have twelve-month bonuses. For example, Metro Bank paid no less than 5.11 pc last January. on its Limited Edition Variable Rate Cash Isa. That has already fallen to 3.1% over the year – a much higher cut than the 0.5 percentage point cut in the base rate we have seen since January 2024.
But things will get worse. The rate includes a bonus – and once you’ve been on the account for a year, it disappears. Instead, you’ll earn Metro Bank’s standard rate of just 1.15%.
Don’t move the Isa yourself, but ask the new provider to avoid losing the tax-free interest status on your money, says Sylvia Morris
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Halifax Isa Bonus Saver paid 4.1% this time last year – not a top rate, but a decent rate. The rate has since fallen to 3.6%, in line with the base rate.
After a year, the bank will transfer your money to the Instant Isa Saver, which pays out just 1.15% on balances up to £9,999, 1.25% on balances between £10,000 and £49,999, and 1.6% on £50,000 or more.
National Triple Access Online Isa, which was on sale at 4.25% this time last year, has now fallen to 4.1%.
After a year, your money will be transferred to a regular Instant Isa account with the building society, which pays just 2.05%. This low interest rate will fall even further to 1.8% in early February.
If you were lured by Marcus’s Cash Isa’s 4.75% rate last year, log into your account and renew your bonus. What is unusual for banks and building societies is that you can do this when the bonus runs out, if there is still one on offer.
That rate of 4.75%, including the bonus, has now fallen to 4.3%. Once your bonus expires, you will earn 3.79pc. You can increase it again to 4.3% in a few minutes by simply extending your bonus.
If your one-year fixed rate Isa is coming to an end, look for the best rates on offer now (4.53% from Shawbrook and 4.52% from Virgin Money).
Your current provider’s rate may not be nearly as competitive as it used to be.
One of these is Tesco Bank, which became part of Barclays in November. Last year it offered a near top rate of 4.9% and now only 4.05%.
To switch Isa, find an account that suits you and then ask the new provider to arrange the move. Don’t do it yourself, because you will lose the tax-free interest status on your money.
While there are still great interest rates available, they are generally not as generous as in January last year, thanks to two cuts to the Bank of England’s base rate, from 5.25% to 4.75%.
Cutbacks among providers followed, the latest of which are now trickling down.
Some have lowered their rates by more than the 0.5 percentage point drop in the base rate, others by less.
But there’s still a big difference between the best paying, easy-to-access cash Isa (5 percent) and the worst (1.15 percent).