Trading 212 cuts its Isa to 5%, but it’s still the best tax-free rate around

Products mentioned in this article are independently selected by This is Money’s specialist journalists. If you open an account using links marked with an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence.

Savings interest rates have fallen dramatically since the Bank of England cut the base rate to 5 percent last month.

In the week following the Bank of England’s announcement, analysis by This is Money found that at least 100 savings accounts had their rates cut, including low-credit savings accounts, fixed-rate bonds and cash ISAs.

But the good news is that savers can still get the highest savings interest rates.

Trading and investment platform Trading in 212’s cash Isa* pays a market-leading rate of 5 percent, despite being reduced today.

Trading 212 launched its cash Isa for new and existing customers in May.

At launch, a rate of 5.2 percent was paid, the highest rate available for an easily accessible tax-free account.

From today, the rate has dropped to 5 percent for new and existing customers. But despite this, it is still the highest cash Isa rate on the market.

It’s true Plum’s Cash Isa who pays 4.92 percent and Chip’s flexible tax-free Isa* who pays 4.84 percent.

According to interest rate monitor Moneyfacts Compare, the average easy access ISA pays a rate of 3.29 percent.

Trading in 212’s cash Isa* is a flexible Isa, meaning you can take money out of the Isa and replace it without affecting your Isa exemption, provided you replace it within the same tax year.

Flexibility can be a useful tool with an ISA, allowing you to keep as much of your savings tax-free as possible.

The Isa can only be opened through the Trading 212 app with a deposit from £1.

Is it protected by FSCS?

Trading 212 states on its website that all money held in a cash Isa is protected by the Financial Services Compensation Scheme up to £85,000.

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

The funds in the Trading 212 Isa are held in partner bank accounts with Barclays, NatWest and JPMorgan.

Trading 212 is an FCA regulated firm and an Isa custodian registered with HMRC. As such, it can offer savers a cash Isa despite being an investment app and not having a banking licence.

It is not unusual for companies that are not banks or building societies to use other institutions for their FSCS. However, it is not common to use three different banks.

Previously, customers were unable to see which of the three banks their money was held at for FSCS protection, but Trading 212 has changed this and customers can now see what percentage of their money is being deposited into interest at each bank in the Cash tab in the Trading 212 app.

This means that if you already have money with Barclays, NatWest or JPMorgan, you need to be careful not to exceed the £85,000 limit when depositing money into an account with Trading 212.

How does this compare to other top Isa deals?

Plum

Plum’s cash Isa* is the second best easy-access cash Isa on the market after Trading 212’s which pays 4.92 per cent. But it has more catches.

The rate includes a bonus of 0.88 percent for the first 12 months. After 12 months, the rate drops to 4.04 percent.

Plum’s Isa allows transfers from other Isa providers, but if you transfer from an existing Isa you get 4.04 per cent instead of 4.92 per cent. This is not a flexible Isa.

If your balance falls below £100, or you make more than three withdrawals in a year, the rate drops to 3 percent. The minimum deposit required to start saving is £100.

This account can only be opened by downloading the Plum app. The minimum deposit required to open an account is £1.

All money put into Plum’s deal will be held by Citibank and will be eligible for protection through the Financial Services Compensation Scheme of up to £85,000 per person.

Chip

Chip’s cash Isa* pays 4.84 percent. The account is also fully flexible, allowing savers to deposit and withdraw money instantly without restrictions and without affecting their Isa allowance.

This means savers can repay the money they withdraw from their Isa without it counting towards their annual Isa exemption, as long as they repay the money in the same tax year.

This account can only be opened by downloading Chip’s app. There is no minimum deposit required to open an account.

Chip now allows savers to transfer money from another cash Isa, making the Isa even more attractive to savers. Previously, this was a major disadvantage for savers wanting to transfer an existing Isa.

All money deposited into Chips Deal is managed by ClearBank and is eligible for protection through the Financial Services Compensation Scheme of up to £85,000 per person.

Cynergy bank

The cash Isa from Cynergy Bank pays a rate of 4.82 percent. This is the best cash Isa savers that don’t need to download an app.

It can be opened online at Cynergy Bank’s website with a minimum of £1 and allows transfers from another provider. However, it is not a flexible Isa.

All money deposited is eligible for protection through the Financial Services Compensation Scheme up to a maximum of £85,000 per person.

Who is Trading 212?

Trading 212 is a trading and investment app that was founded in 2004. It offers low-cost trading and investment. It is free to maintain a cash Isa account with Trading 212.

It is the latest in a wave of low-cost trading and investment apps offering a high-interest cash ISA.

To view the interest, customers need to click on the ‘Earn Interest on Cash’ option on the app.