Trading 212 increases its Isa rate, making it the tax-free best buy

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

With the Bank of England keeping interest rates at 5 percent, savings experts predict that rates are more likely to fall than rise.

But the good news is that savers can still find a high savings rate that is well above inflation of 2.2 percent.

Trading and investment platform Trading 212 this week broke the trend of providers lowering their rates by Easily accessible cash Isa* deal to 5.1 percent.

Even before the boost, interest was paid at 5 percent, the highest rate on the market.

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.

Earlier this month the rate dropped to 5 per cent for new and existing customers. But despite this it was still the highest cash Isa rate on the market and now beats the rest by a fair margin.

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 an interest rate of 3.27 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 should be careful not to exceed the £85,000 limit when investing money with Trading 212.

How does this compare to other top Isa deals?

Chip

Chip’s flexible cash Isa* is the second best easy-access cash Isa on the market, after Trading 212, with an interest rate of 4.84 per cent.

Like Trading 212’s cash Isa, it is a flexible Isa and offers a competitive rate for customers who want to cash in and out of their pot without using up their Isa allowance.

There are no restrictions on the number of times you can withdraw your money and Chip does not reduce the interest rate for withdrawing your money.

It follows 0.26 percent below the current base rate, which is 5 percent. Previously, this account paid 5.1 percent, when the base rate was 5.25 percent.

When the base interest rate goes up or down, your savings interest rate changes the same day.

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

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

Plum

Plum’s cash Isa* pays 4.84 percent, but includes a bonus percentage of 0.88 for the first 12 months.

If your balance drops below £100 or you make more than three withdrawals a year, the rate drops to 3 per cent.

The other downside to Plum’s account is that it’s not flexible. Flexible cash Isas are a great tax saving tool because they allow you to dip into your pot and, as long as you pay the money back in the same tax year, it won’t lose its tax-free wrapper or use up any of that year’s Isa allowance.

This account can only be opened via the Plum app with a minimum deposit of £100. All deposited funds are fully FSCS protected by CitiBank.

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, but 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.