money Money news &predictions for savers
into the financial year of 2012/13, many savers are being bombarded with cash Isas which promise a
positive return. When that
happens, interest earned on savings will once again exceed the value lost to the inflation rate - a situation which has only occasionally applied since interest rates plunged in the global banking crash of 2008/09.
Long-term savers tend to now salt away more money into Isas (individual savings accounts) than pensions - and this trend could be encouraged by the latest Budget which will eventually take more tax off the over-65s. This is because capital and interest drawn from Isas in retirement will stay outside the taxman's grasp, whereas pension income is more likely to incur tax.
Now we're well into the new tax year, consumers have the chance to benefit from another year's Isa allowance and protect hard-earned cash from the tax man. On April 6, the annual Isa limit rose to £11,280, of which £5,640 can be saved in a cash Isa. Alternatively, the entire allowance can be invested in equities. In many cases, an Isa account can be opened with as little as £1, with further amounts added during the remaining 51 weeks of this new tax year.
Kevin Mountford, head of banking at MoneySupermarket.com
, says: "A new tax year should encourage all those savers who failed to make use of their Isa allowance to make a fresh start this year and ensure any savings they have are in a tax-efficient wrapper.
"By thinking about your Isa allowance now rather than at the end of the tax year, you can make the most of protecting your savings from the tax man and help boost your savings pot. We have already seen a number of new products come on to the market at the start of the year and it's encouraging to see rates are creeping up year on year. With rates on Isas and non-Isas on a par, it's a no brainer for consumers to make the most of their Isa allowance."
Britain's biggest building society, Nationwide, is leading the charge with a Flexclusive cash Isa rate paying 4.25%, but this rate is available only to new or existing FlexAccount customers, who must continue to deposit at least £750 per month into this account. However, savers must hold the Nationwide account for at least 18 months to earn 4.25% - at which point the introductory bonus of 2.25% comes off, and the rate falls sharply to at least 1.5% above Bank base rate.
Waycot says: "The majority of savings accounts include a short-term bonus that is only around long enough for you to forget about it. "This will only change when the banks want your loyalty as well as your savings, so until then it is a case of moving your money when the rate moves." (see ‘Worth Noting’ opposite)
Savers, of course, shouldn't be entirely put off by complex bonuses: Rates on offer now could be more generous than many available later in the year.
Still the golden egg? A
We look at changes that happened at the beginning of the tax year and consider ISA accounts currently available for UK savers
lthough we're only a few months
Andrew Hagger, savings expert at Moneynet.co.uk
, says: "Rates on cash Isas tend to be higher at this time of the year. If you open an account now, when high headline rates are bandied about, providers usually honour these rates on further investments added to an account later in the year."
But as bonuses become deeply entrenched in the Isa market, savers are effectively on notice to check the rate which they receive every few months or so. That can get difficult if they hold Isas with several providers. Many long-term savers therefore choose to open Isa accounts which accept transfers from previous providers - to ensure regular rate checks are carried out more easily or plump for a good alround rate without temptng bonuses that they have to keep an eye on.
In the Moneyfacts.co.uk
best-buy list, at least three don't allow any transfers - AA Internet Access (Issue 3), Cheshire Building Society Direct cash Isa and ING Direct cash Isa.Th
e Post Office Premier cash Isa paying 3.01% on a minimum £100 deposit (this includes a 1.26% bonus for 18 months), by contrast, does allow a transfer of older accounts. Be aware this rate could drop to just 1.75% after the 18 month bonus period - falling into the lower tiers of rates avaialble.
Where Isa savers have amassed a sizeable sum over the years, Hagger suggests that the best returns might be achieved by dividing money between several providers. "Suppose you have £30,000 tucked away in Isas," he says, "there may be a case for putting £10,000 in instant access Isas, a further £10,000 in two- year bonds and the final £10,000 in a five- year bond, the latter two both enjoying fixed rates. This might generate more income for people who don't intend to access part of their money for some years down the line."
There are some fantastic headline grabbing ISA rates advertised but it’s often wise to look deeper. Some of the higher rates offered maybe for the first 6 or 12 months of the ISA account’s life. After this they can revert to very low rates. If you don’t want to keep opening new accounts and moving your money from account to account, it’s a good idea to consider a decent long-term rate without ‘New customer’ bonuses
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