Easy ISAGuide

Cash ISAs rates rising but it also serves as a reward for leaving your money with the bank or building society for a set period. As an example, while the top variable-rate ISAs pay 3.05% (AA, Newcastle Building Society and Northern Rock), tie your money up for a year and you’ll receive 3.25% from Metro Bank or Skipton Building Society. Leave it for longer and the rate rises further, with Governor Money offering 4.5% on its Bank of Ireland UK five-year fixed-rate ISA.

But although you can squeeze some extra interest out by going for a fixed rate, make sure you can afford to leave your money tied up. Many providers will levy a penalty if you access your cash before the end of the

Top five fixed-rATE ISAS accepting transfers Provider Account name Rate (%) Notice

Early withdrawal penalty

Governor Money Bank of Ireland UK – 5 Year Fixed Rate ISA

Halifax

ISA Saver Fixed

Clydesdale Bank

Cash ISA – Fixed Rate Bond (Issue 14)

Yorkshire Bank

Cash ISA – Fixed Rate Bond (Issue 14)

krbs

Flexible Fixed Rate ISA Five Year (Issue 1)

Source: Moneyfacts.co.uk, 18 January 2012

4.5

30.01.17 270 days’ interest and £15 admin fee

4.4 Five-year bond

One year’s interest

4.4

29.01.16 £30 charge and account closure

4.4

29.01.16 £30 charge and account closure

4.35 Five-year bond 180 days’ interest on sum withdrawn term. For example, close the table-topping Governor Money’s Bank of Ireland product early and it’ll slap on an early closure charge equivalent to 270 days’ interest, plus a £15 administration fee. Similarly, you’ll lose a year’s interest if you close Halifax’s five-year fixed ISA early.

Bonuses Bonuses are also a common feature on cash ISAs. These are usually paid for an introductory period, which is typically one year, after which the rate falls back.

For example, among the top cash ISA interest rates Newcastle Building Society’s Newcastle Bonus ISA (issue 2) pays 3.05% of which 0.95% is a 12-month bonus; the AA’s Internet Access ISA (issue 2), also paying 3.05%, includes a 1.35% 12-month bonus; and ING Direct’s Cash ISA, paying 3%, includes a 1.96% bonus for 12 months.

“Bonuses are rife today,” says Sue Hannums, director of savingschampion.co.uk. “If you want a decent rate you’ll have to go for a bonus account. Just make sure you monitor when the bonus rate finishes and move ISA providers to get another good deal.”

Before deciding where to stash your ISA cash, minimum deposit levels also need a quick scan. Although it won’t make much difference whether you’ve got £1 or £5,000 to deposit among the variable-rate ISAs, it can restrict your choices among the fixed-rate deals. For example, you’ll need at least £100 to take advantage of Governor Money’s bestselling 4.5% deal, £500 for Halifax’s five-year cash ISA and £1,000 for a five-year cash ISA from Kent Reliance (krbs).

As well as studying interest rates and account features, it’s also important to consider how you want to run your cash ISA. Accounts can be held in a branch or operated by post, phone or online. Often the decision will come down to what’s most convenient for you but, on average, you can secure yourself a few extra pounds of interest by going for an internet-only cash ISA.

10 MONEYWISE | EASY I SA GUIDE 2012

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