‘Use it or lose it’ bank account warning ahead of crucial ISA deadline in weeks – where’s the best place for your cash?
EACH year, savers can put up to £20,000 into a tax-free ISA, with the allowance resetting again on April 6.
However, Chancellor Rachel Reeves is thinking about reducing that limit to only £4,000 in her Spring Budget on March 26.
Here, James Flanders explains what is going on and where is best to stash your cash . . .
WHERE ARE THE BEST SAVINGS RATES?
CASH ISAs currently outperform the highest interest rates offered by non-ISA accounts — but rate changes happen daily and the market is volatile.
The best easy-access cash ISA is offered by Trading 212, paying 5.03 per cent interest, with a minimum deposit of just £1.
This rate beats the top-paying non-ISA easy access account, from Sidekick Money, which offers 4.59 per cent.
However, the same cannot be said for fixed-term accounts.
The best one-year fixed cash ISA is currently offered by Vida Savings, with a return of 4.46 per cent.
In comparison, the leading one-year fixed bond, from Zenith Bank UK, delivers a slightly higher return of 4.6 per cent.
IS A CASH ISA RIGHT FOR ME?
WHETHER a cash ISA is the right option depends on how much money you have to save, as well as your income tax threshold.
Basic rate taxpayers can earn up to £1,000 interest tax-free a year, while higher rate taxpayers get £500 a year tax free.
If you think you will earn more interest than your tax-free allowance, then an ISA will protect you from paying income tax on interest from that account.
On current rates, a basic rate taxpayer would need to have savings of more than £21,000 a year to exceed their personal savings allowance and become liable for tax on interest.
So if you have less than this then focus on finding the best rate and do not worry about whether it is an ISA or not. If you have more than this then you should put your cash in an ISA.
If you want easy access to your cash, Trading 212’s cash ISA offers the top rate.
If you are willing to lock your funds away for a longer period and can afford not to make withdrawals, then Zenith Bank’s one-year fixed-term bond, which requires a £1,000 minimum deposits, offers 4.6 per cent returns.
If your income is nearing a higher rate threshold for tax, then any savings over £10,000 would be better off in an ISA.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “If the Government decides to cut the personal savings allowance, you’ll be grateful for your ISA.
“However, average earners with modest savings might be reasonably sure they won’t pay tax on their savings this year.
“For now, savers with only small nest eggs can earn more interest in a fixed non-ISA.
“You should also look at moving your ISA account to one paying higher interest, as there is £54billion sitting in accounts paying less than two per cent.”
Sarah added: “Money in cash ISAs is particularly ‘sticky’, so there’s a real risk people put money into one, and don’t keep an eye on the rate.
“It can mean the rate is gradually cut over time, until you’re getting a miserable return.
“There are some great rates around at the moment, so a switch can be particularly rewarding.”
Transferring your cash ISA to a new provider is generally straightforward. Your new ISA provider will handle the entire process.
Check with both your current and new providers about any potential transfer fees or penalties. Once you’ve chosen a new ISA, apply for it with the new provider.
Cash ISA transfers usually take up to 15 working days. However, it can sometimes take longer, so it’s best to allow up to 30 days.
HOW TO FIND THE BEST RATES
VISIT price comparison websites such as moneyfactscompare.co.uk and MoneySupermarket.
They let you tailor your searches to an account type that suits you.
It’s always wise to have some money stashed inside an easy access savings account to ensure you have quick access to it to deal with any emergencies.
If you are looking to save money over the long term, a stocks and shares ISA could offer greater returns.
Your money could go down though. Over the past 12 months, the average returns on such products increased by 11.86 per cent, compared to 3.27 per cent from the average cash ISA, according to Moneyfactscompare.co.uk.
Find out more at moneyhelper.org.uk/en/savings/investing/stocks-and-shares-isas.
SMART METER SHORTAGE
HOUSEHOLDS are having to wait up to a year to get a smart meter appointment.
With a shortage of qualified staff, suppliers are struggling to keep up with increased demand for the technology.
Our investigation found suppliers including Octopus Energy, E.ON, EDF, Scottish Power and Utilita have too few available appointments in some areas.
Others cannot tell customers when an appointment will be available.
Last year, 2.37million smart meters were installed, taking the total number of households with the devices to 61 per cent. This is the lowest number installed since the pandemic and 1.5 per cent less than the previous year.
Figures published by energy suppliers show several missed their installation targets last year.
British Gas had an installation target of 1,192,991 for 2024 but only installed 713,897. E.ON Next installed 602,223 smart meters in 2024, which was 70,529 fewer than its target.
Maximilian Schwerdtfeger, sustainability expert at The Eco Experts, said: “The smart meter roll-out is being held back because energy suppliers cannot afford to hire or train enough installers to meet demand.”
Check with your supplier when it will release new slots and ask it to notify you when they become available.
DON’T MISS £150 VOUCHER
THOUSANDS of energy customers are being warned not to miss out on bill support by ignoring an important letter.
Since October, millions of households began to receive the £150 Warm Home Discount.
The method of payment for this discount depends on the type of electricity meter you have.
For those with smart credit or pre-payment meters, the discount is automatically applied.
Households with traditional pre-payment meters that require a key or card to top up need to redeem a voucher at their local top-up point.
The Post Office began issuing these vouchers on behalf of British Gas, E.ON Next, Ovo Energy, EDF Energy, Scottish Power and Good Energy from October 21, 2024.
Around 260,000 warm home discount letters with vouchers have been issued so far.
The deadline to cash in your voucher will be stated in your letter and usually varies between 30 and 90 days from the point of issue. Visit a Post Office branch to redeem your voucher.
Present your voucher to the counter staff, who will scan its barcode or manually enter the code.
They will apply the £150 credit directly to your pre-payment energy meter key or card.
You may need to show identification, such as your driving licence, along with a recent utility bill.
- Unlock even more award-winning articles as The Sun launches brand new membership programme – Sun Club.