Cash ISA rates cut: is your account now paying peanuts?

Millions of people open cash ISAs every year, yet many now pay next to nothing. Don’t accept such a shoddy deal – switch to a decent account today!

It’s been another miserable week for savers as more banks take an axe to their savings rates.

NatWest is the latest culprit, announcing it will cut the rate on its cash ISA by up to 0.5% from October, meaning savers holding less than £25,000 will earn a frankly appalling 0.01%.

But NatWest is by no means alone. Many banks and building societies have been cutting their ISA and savings rates since the Bank of England cut Base Rate from 0.5% to 0.25%.

Find the best rate for your savings: compare accounts on loveMONEY

Natwest reducing the interest rate on my savings account to 0.01% APR. Also known as "what's the point?"

— Mike Fethers (@fevington) August 25, 2016

Savings rates could fall even further

We’re starting to see a clearer picture of what ISAs, and savings in general, will look like now that Base Rate has been cut – and it isn’t pretty.

The table below highlights some of the worst-paying cash ISAs on the market at the moment.

The really worrying thing is that a number of providers haven’t changed their rates since the rate cut, so things could get worse still.

And let’s not forget that the Bank of England has already warned it could cut Base Rate again this year…

*Effective from October 31 2016

Make the most of your money

[SPOTLIGHT] Official stats released today show that more than 10 million cash ISAs were opened in the last tax year, so the impact of falling rates will be felt by many.

If it’s specifically a cash ISA you’re after, it’s vital you choose one of the top-paying accounts.

There is no point earning next to nothing on your savings as inflation will eat away at the value of your money.

Below are some of the best cash ISAs that allow instant access.

Note we’ve excluded Help to Buy ISAs, which tend to pay the highest rates but are only available to first-time home buyers.

Find the best rate for your savings: compare accounts on loveMONEY

Better alternatives to cash ISAs

If you’re not fussed where you stash your cash, there are a number of alternatives that beat the rates offered by cash ISA providers.

And with the new Personal Savings Allowance, which allows you to earn up to £1,000 tax-free interest in any savings account depending on which tax bracket you fall into, most savers will be able to avoid handing any cash back to the taxman.

We’ve written about this many times before, but current accounts remain the most attractive option – especially for those with smaller savings pots.

Nationwide FlexDirect pays 5% on balances of up to £2,500 for the first year, falling to 1% thereafter. Helpfully, the rate is fixed so you don’t need to worry about the rate falling for 12 months.

You can get the same rate with the TSB Classic Account, but it’s variable, so could be cut in the future, and only available on balance of up to £2,000.

For larger sums, you can get 3% on balances up to £20,000 with Santander’s 123 Current Account (falling to 1.5% from November 1). Keep in mind there’s a £5 monthly fee to pay on this one, so you’ll lose £60 interest a year.

For a more detailed breakdown of the best current accounts for savers, have a read of our guide to bagging the best rates before they disappear.

Finally, if you are willing to take on some risk, you could consider investing your money in the stock market. Here's a beginner's guide to stocks & shares ISA.

Find the best rate for your savings: compare accounts on loveMONEY

Read more on loveMONEY:

Santander halves interest rate on its 123 Current Account

Best student current accounts

Where to earn most interest on your cash