Tuesday 11 May 2010

Who's cashing in on ISA rates?

A few weeks ago I wrote an article for SavvyWoman about switching cash ISAs and - knowing how fond banks and building societies are of changing rates - last weekend I checked that the rates were up to date.

What was interesting, no, let me rephrase that, somewhat shocking, was how low some cash ISA rates were. Did you know that some ISA providers will take your money and give you a tax-free return of 0.10%. Yup, a tenth of one percent.

That means even if you paid in the current tax year's maximum amount of £5,100 you'd still only earn just over a fiver in interest after a year. That's enough for a fish and chip supper or a bottle of nail varnish, but it's not much to show for saving several thousand pounds for 12 months.

OK so let's name some names - Santander, which - rightly - got lots of publicity for its market-leading cash ISA earlier this year also has an 'easy ISA' paying 0.1%. Oh, but if you've got £27,000 or more you'll get 0.3%. That's OK then.

The Dunfermline building society has a Soccersaver Cash ISA for Celtic fans, but scores an own goal with its 0.1% interest rate.

Meanwhile Barclays has announced that it will keep its market leading cash ISA (paying a healthy 3.1%) open to new customers until June 1st. That's the good news. The bad news is that this ISA won't accept transfers in from existing ISAs, it will only take new money. If you want to transfer your ISA to Barclays, you can transfer it to an account paying 0.1%. Hmmm. I'll get back to you on that one.

I appreciate that banks and building societies have to make a profit and that the Bank of England rates are low. But the grand game of snakes and ladders that cash ISA savers seem to have unwittingly signed up for isn't the answer. Someone's laughing all the way to the bank, but it's not the majority of cash ISA savers.