- Compare cash ISA rates
- Stockmarket related ISAs
- Is an ISA right for you?
- Guide to ISAs
All rates correct as at 11/03/2010
Are low cash ISA rates getting you down?
Interest rates have been stuck at 0.5% for almost a year now, and though many mortgage holders may be celebrating, savers and investors are not, especially those with pitifully low cash ISA deals. When cash ISAs were first launched in 1999, the average rate was 5.71%, now, it is just 2.12%, and if you want instant access to your cash, the average rate is a miserable 0.76%.
So what are the options?
Switch cash ISAs for a better rate
Although the average rate is low, there are still some good deals on the market, especially if you are willing to leave your cash alone; for example, RBS’ Royal Deposit ISA is 3 year fixed rate cash ISA that is currently returning 4% a year.
For those who want easier access to their cash, Santander’s fixed rate cash ISA is offering 3.5% (including bonus rate & term), the Newcastle Cash 120 notice is currently paying 3% (including bonus R&T) and First Direct’s no notice is paying 2.75% (including bonusR&T).
Both Alliance and Leicester and Santander have instant access ISAs is paying 2% on balances over £1 and 2.75% on balances over £9,000 and Scottish Widows has an instant access E-Cash ISA offering 2.10% (including bonus R&T) to all new and existing customers.
You can transfer any existing ISA balance to another ISA provider without losing the tax-free status, or affecting your annual ISA allowance. This means that if you have been building up your cash over the years, but are now disappointed with the returns, you can simply transfer to a different cash ISA account with a better rate.
However, make sure you ‘transfer’ don’t withdraw your money and then open another ISA – if you do this, you’ll lose the tax benefits.
Consider stocks and shares ISAs
There are currently 14.2million ISAs in the UK - 11.3million are cash ISAs while just 2.9million are stocks and shares ISAs. If you are one of those people who uses their cash ISA but doesn’t use their stocks and shares ISA allowance, maybe it is time you considered it? There are lots of different stocks and shares ISA options to choose from including structured products, single funds and multi-manager funds.
With stocks and shares ISAs, you can choose your level of risk and decide what type of return you want, for example if you want income you could take a look at something like the Barclays Wealth Regular Income Bond, a 6 year structured income bond offering an annual yield of 6%.
If you are looking for growth, something like the Barclays Target Growth Plan is a 5 year investment offering a 50% return (if the final FTSE 100 index level is above initial index level) might be good, or if you want income and growth, something like the Invesco Perpetual Monthly Income Plus fund, which aims to 'achieve a high level of income whilst seeking to maximise total return' is an option and currently recommended by a good number of experts.
Your entire 2009/10 ISA allowance is £7,200 (£10,200 for over 50s) but only up to £3,600 of this (£5,100 for over 50s) can be put into a cash ISA, with the remainder available to invest in a stocks and shares ISA. So, if you have made a contribution to your 2009/10 cash ISA you have a choice to top this up to the maximum cash contribution, or invest the remainder of your annual allowance into a stocks and shares ISA.
You may also transfer any funds you have built up over the years –, and have the option to transfer cash ISAs to a stocks and shares ISA (but not the other way around).
But you should remember that once a cash ISA has been transferred into stocks and shares, it cannot go back to being a cash ISA; keep in mind that it is sensible to maintain a proportion of your investments in cash to act as an emergency fund. Also be prepared for the fact that some providers have penalties for transfers and others may only allow 100% of the capital to be transferred.
What should I do next?
According to research by Clydesdale & Yorkshire Banks, it's estimated that the total ISA allowance available to taxpayers since ISAs were launched in 1999 is around £2,305 billion, but that by the end of this tax year only around 15% of this (£350 billion) will have been invested in ISAs.
So, if you haven’t made use of your ISA allowance, do it before it’s too late - the tax year end is 5th April!. You can’t carry your allowance forward, so use it, or you will lose it.
