If, like me you're in the process of getting your Icesave Cash ISA back, or you just want to transfer your ISA to be paid a better rate, where should you put your cash now? Check out these best buys.
Well, there's been good news in my household this week. I, along with many other Icesave customers finally received my second email from the Financial Services Compensation Scheme (FSCS) detailing what I need to do to get my money back. Hurrah!
Icesave Collapse
Landsbanki, the Icelandic bank that owns Icesave, went into receivership on 7 October 2008, leaving its 230,000 UK customers unable to access their accounts ever since. The UK government quickly promised that UK savers would get all of their money back, but for those who had needed to access their cash to pay for imminent weddings, holidays or house deposits, for example, the last few weeks will have proved extremely stressful.
Offshore Accounts
Of course, there are many who have not been as fortunate as Icesave savers. Those who stashed their cash in offshore savings accounts such as Landsbanki Jersey, for example, have no depositor protection, and face the bleak news that the administrator is aiming to recover around 30% of savers deposits.
Payment Process
The FSCS has been handling the Icesave payment process, which is carried out electronically using the Icesave website to savers' nominated accounts. Every Icesave account holder should by now have received a first email explaining the process for retrieving their money, and the FSCS is currently in the process of sending out a second email, explaining precisely what to do.
Once customers have received this second email, they have just one month to log in to their accounts and move their cash.
Cash ISA holders
Of course, if like me you had an Icesave Cash ISA, you'll probably be concerned about its tax-free status- after all; we know that ISA rules state that if an account is closed, all tax-free benefits are lost. Fortunately, this should be quite safe - the FSCS has promised that it will be sending all Icesave ISA customers a certificate, allowing us to re-invest that sum in an ISA with another provider. Provided you do this by 5 April 2009, the money will not lose its tax-free status.
Where now?
So the next question is, where should you transfer your cash ISA to? With interest rates plummeting and our faith in the banks thoroughly shaken up, who should we trust?
Well, for those planning to move their cash to an alternative ISA product, and assuming you have £3k to move, here is my list of the current top paying, instant access cash ISAs to transfer to.
Best Buy, Instant Access Cash ISAs to transfer to:
Provider | Account | AER | Min-Max Investment | Interest paid | Bonus/Catches? | Conditions |
|---|---|---|---|---|---|---|
Scottish Widows Bank | E-Cash ISA | 6.00% | £10-£39,600 | Yearly, can be paid away or compounded | Rate includes 1.50% bonus for 12 months. | Internet only. Rate after bonus period guaranteed to be no less than 0.25% below Scottish Widows Bank Base Rate to 31.12.12. |
NatWest | Cash ISA | 5.94% | £1-£8,999 | Monthly, must be compounded | Inc. 1.76% bonus for 12 months. | Transfers must come from outside the RBS group. |
Kent Reliance BS | Direct Variable Rate Cash ISA | 5.76% | £1-£39,600 | Yearly, Compounded | Post only | |
RBS | Instant Access Cash ISA | 5.70% | £3K-£8,999 | Yearly, Compounded | Rate includes 1.75% bonus for 12 months | Transfers in only, transfers cannot come from NatWest. |
Principality BS | e-ISA | 5.50% | £1-£39,600 | Yearly, Compounded |
As you can see, top rates, while not as amazing as a few months ago, are OK for the moment, with Scottish Widows Bank topping the list (although note that this is an internet-only account). For those needing using their savings to provide an income, this is also the only account that allows interest to be paid away.
Additionally, while I am definitely not a fan of short-term bonuses (I much prefer a straight-talking rate!) I have come to realise that in these uncertain times we simply need to keep a better eye on our money and be prepared to move it regularly, hence the inclusion of three accounts featuring bonuses.
However, there is good news for those with a bit more to transfer. NatWest's Cash ISA offers a number of tiers - meaning that those with more than £27k can earn an impressive 6.6%AER (still inc. that 1.76% bonus).
Interest rate tiers for NatWest's Cash ISA
Balance | AER |
|---|---|
£27,000+ | 6.60% |
£18,000 - £26,999 | 6.45% |
£9,000 - £17,999 | 6.15% |
£1 - £8,999 | 5.94% |
Under 25?
And there's good news for the under 25s - Kent Reliance BS has another Direct Variable Rate Cash ISA, with much of the same features, except that it pays 6.26%AER!
Additionally, for a higher return, Abbey is offering its Super ISA (issue 3) paying 7.25%AER - although it does insist that to qualify you must put an equivalent sum into its Guaranteed Growth Plan.
So what should we do with our savings? Well, from a personal point of view, I am now pretty wary of handing my cash over to a foreign bank, and intend to stick a bit closer to home. Indeed, the FSCS' guarantee to protect the first £50k of our savings certainly makes UK banks seem far more attractive. However, those with more than this sum should ensure they spread the extra in separate accounts for maximum protection.
Banking Licences
Additionally, it's vital to remember that this guarantee applies per financial group, not per provider. For example, someone with £100k to save would be fully protected by stashing £50k with NatWest and £50k with Yorkshire Bank. However, stash half into an HSBC account and the other half with First Direct, and you'll find only £50k of that £100k would be covered, as they both run under the same banking licence. If you're not sure who's in cahoots with whom, check out this article.
Kaupthing Singer and Friedlander
And on a final note, there is some good news for savers with Kaupthing Singer and Friedlander who did not transfer to ING Direct. The FSCS has announced today that all savers should now have received their compensation claim forms, and is currently processing the forms they have had back. Once the eligibility and final account balances of claimants have been confirmed, they will be in a position to pay claims quickly. Hurrah!