As savings account rates keep plummeting, the gap between them and the top Cash ISAs widens.
High street savings rates continue to head downwards, particularly on instant access accounts. However the good news is, for now at least, Cash ISA rates are holding up.
In the past few weeks, the top instant access savings account has gone from paying 1.60% to 1.45%. By contrast, the top easy access Cash ISA has stayed at 1.75%.
Add in the attraction of a tax-free return on your money, and if you want to save in cash, even if it’s just in case of emergency, you should be looking at ISAs first.
It’s not all good news though. Research from financial data provider Moneyfacts found that in January 2013 the average rate on a Cash ISA was 1.87%. By January this year it had dipped to 1.64%.
Having said that, the fall on instant access savings accounts has been far greater.
Let’s have a look at how ISAs measure up against savings account right now.
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Instant access
For this example, I’ve used the Kent Reliance savings account, as this truly offers unlimited access to your money.
|
Top product |
Interest rate (AER) |
Minimum deposit |
Access |
|
Stafford Railway Building Society Cash ISA |
1.75% |
£1 |
Branch, post |
|
Kent Reliance Building Society Easy Access Savings |
1.45% |
£1,000 |
Online, branch, post |
As you can see, there’s a decent amount of clear water between the two top accounts.
Short notice
The two leading notice accounts both come from the same bank: the Islamic Bank of Britain. They are Sharia-compliant, which means they are bound by Sharia law and pay an anticipated profit instead of an interest rate.
Both have the same 120-day notice periods and the same minimum deposit.
|
Top product |
Anticipated profit rate (AER) |
Minimum deposit |
Access |
|
Islamic Bank of Britain Sharia-compliant 120-Day Notice ISA |
1.81% |
£250 |
Online, branch, post, phone |
|
Islamic Bank of Britain Sharia-compliant 120-Day Notice Account |
1.81% |
£250 |
Online, branch, post, phone |
You can also get 1.80% from Earl Shilton Building Society with just 90 days’ notice required to withdraw your money and a minimum deposit of just £10.
Fixed rate accounts
[SPOTLIGHT]The situation with fixed rates isn’t quite so clear cut and depends in part on your tax situation. If you fancy locking your money away for three and a half years, Coventry Building Society’s Fixed Rate ISA offers a rate of 2.75%, which beats the top three-year fixed rate savings account.
If you don’t have more than £20,000 to deposit, you should look at current accounts, particularly if you’re a non- or basic rate-taxpayer. Nationwide’s FlexDirect account pays 5% on balances up to £2,500 for a year, although you do need to make sure you deposit £1,000 a month.
Alternatively, Clydesdale Bank and Yorkshire Bank are paying 4% on balances up to £3,000 until March 2015. Again, you need to deposit £1,000 a month.
If you’re happy to take on a bit more risk, then you could explore peer-to-peer lending, where you lend your money out to individual borrowers.
For a full rundown of your cash options, have a look at Where to earn most interest on your cash.