Find out our recommendations for the best new cash ISAs, the top accounts to transfer your existing ISA(s) to, and how to avoid those sneaky fees and conditions.
Well, it's April and a new tax year is upon us. And of course, a new tax year brings a new cash ISA allowance. So, hot on the heels of my Best Buy Cash ISAs 2006/7 article, I have decided to write one listing the best deals available for the 2007/8 ISA season.
Cash ISAs used to be relatively simple -- you knew that anyone aged 16 or over could save up to £3,000/year, tax free, so each year it was a case of simply picking the best paying account and stashing your cash.
However, things have changed. Providers now battle to get their accounts at the top of the tables and offer fantastic rates to do so -- but scratch the veneer and you can find notice periods, fees, bonus periods that revert to unexciting rates in short amounts of time and other sneaky terms and conditions.
Existing ISAs (and TESSAs)
What's more, cash ISAs have been around for eight years now, meaning that anyone that stashed the maximum £3k per year could now have a lump sum of £24k (plus interest) to keep an eye on. Add to that the maximum £9k in TESSA contributions and that's a whopping £33k, plus interest.
So it's imperative that we don't forget our existing ISAs each year as even small differences in interest rate can make a big difference to what our money earns.
Consider the following: £24k in an ISA paying 4% AER would earn £960 in interest per year. The same amount in an account paying 5.75% would earn £1,380 -- £420 more!
So if your existing ISA no longer pays a top rate, or you simply want to open your brand new 2007/8 cash ISA, I've dredged through them all to find the best buys.
Existing ISAs
If you have existing ISAs, firstly check the rate that your money is earning -- if it's less than the base rate, it is time to transfer it.
Now, as regular readers will know, I'm not a fan of great savings rates that are artificially buoyed by short term bonuses, or accounts that penalise you for withdrawing your money. Plus I believe that we are all entitled to instant access to our cash! So here are the best instant access accounts for those wishing to transfer an existing ISA (with no penalty for transferring money out again).
Top, Instant Access Accounts for Existing ISAs
-- no bonuses, penalties or catches!
Provider | Rate/ | Min-Max investment | Rate | Accessed/ |
|---|---|---|---|---|
Kent Reliance BS - | 5.71% | £1-£24k | No | Post. |
Yorkshire BS | 5.65% | £10-£15k | Guaranteed to be no more | Internet. |
Bradford & Bingley - | 5.55% | £1k - £24k | Will at least match BoE base | Internet. Must be 18 or over. |
National Counties BS - | 5.51% | £1 - £33k | No | Branch, Post, Phone. |
Skipton BS - Mini Cash ISA | 5.50% | £50-£33k | Rate guaranteed to be no | Branch. |
Source: Moneyfacts
New Money
Alternatively, if you're looking to open your 2007/8 cash ISA with new money, here are the best, straight-paying, instant access accounts available right now, again with no penalty for transferring money out in the future:
Top, Instant Access Cash ISAs for New Money
--- no bonuses, penalties or catches
Provider | Rate/ | Min-Max investment | Rate | Accessed/Conditions |
|---|---|---|---|---|
Egg - Cash ISA | 6.05% | £1k-£3k | Rate guaranteed to at least match Base Rate until 5.4.09 | Internet |
National Savings and Investments (NS&I) - Direct ISA | 5.80% | £1k-£3k | Rate guaranteed to be 0.55% above Base Rate to 5.4.08. | Internet/phone. |
National Counties BS - Guaranteed ISA | 5.76% | £1 - £3k | Rate guaranteed to be 0.3% above Base Rate to 5.4.08. | Branch, Post, Phone. Transfers in permitted after 6.4.08. |
Kent Reliance BS - Direct mini-cash ISA | 5.71% | £1-£24k | No | Post. |
Yorkshire BS - e-ISA | 5.65% | £10-£15k | Guaranteed to be no more than 1% below base rate | Internet. |
Source: Moneyfacts
Now, it's important to stress that the accounts mentioned in the tables above come with no strings -- open one and you will have instant access to your cash with no penalties for transferring your money at a later date. Nor do they offer a rate that includes a short term bonus.
However, you may well have seen an advert for an account with a headline grabbing rate and be willing to put up with a number of terms and conditions in order to earn more short term interest.
I've therefore included a third table, with the best rates for those not requiring instant access to their cash, and willing to put up with a few conditions.
Top Paying Cash ISAs with Conditions
Provider | Rate/AER | Min-Max investment | Transfers in? | Access | Rate guarantees & Conditions |
|---|---|---|---|---|---|
Alliance & Leicester: Premier ISA (apply via the Fool) | 8.10% | £1-£6k | No | Instant access | Rate includes 3.10% bonus until 30.4.2008. Rate guaranteed to be at least 1.00% above |
Abbey: Super ISA | 8.10% | £500-£33k | Yes | Instant access | Reverts to Direct ISA rate from 1.5.08. |
Barclays Bank - Tax Beater Cash ISA | 6.50% | £1-£6k | No | Instant access | Rate includes 1.00% bonus for 12 months. |
Bradford & Bingley - Fixed rate ISA issue 8 | 6.15% | £3k | No | - | One year bond. Upon maturity transfers to ISA maturity account |
Scarborough BS: Guaranteed ISA | 6.10% | £1k-£24k | Yes | 30 day notice | On maturity transfers to variable rate Mini Cash ISA. Rate fixed to 31.3.08, then 5.50% to 31.3.09. |
Source: Moneyfacts
As you can see, some of the terms and conditions are harsher than others, with the Alliance & Leicester account requiring you to switch your current account to them, and Abbey demanding you invest in its Guaranteed Growth plan to take advantage of its Super ISA.
I would urge that you don't get carried away by the rates and only switch or take out these products if you would have done so anyway. You may be far better off choosing a straight-talking ISA product with no ties. And if you should choose to open an Alliance & Leicester current account, try to find an existing customer to recommend you, as you can both earn £50.
Of the rest, the Barclays account probably offers the best deal, as although it includes a bonus this does last for a year giving you plenty of time to move that cash in the next financial year.
Finally, it's worth pointing out why accounts such as the Portman BS 15 Day notice ISA and Saffron BS 30 day Mini cash tracker ISA have not featured. Although they are both advertised as paying 6.05%, this is the gross rate, and rates featured in the above tables are the annual equivalent rate (AER) which in this case is 5.65%. Both of these accounts also slap on what I consider to be an unfair £30 administration fee, should you wish to transfer your money to another provider.
So there you have it, a run down of the best cash ISAs on the market at the moment for those wishing to transfer existing funds, or save new money. So don't wait until next April -- stash that money into a tax free cash ISA now, and maximise your interest for the year.
More: Cash ISAs | Top Deals for Savers | Top Saving Accounts For Kids