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Savers left disappointed by the Budget
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With last week's Budget leaving most savers largely unimpressed, we take a look at what you can do to maximise the returns on your savings
A £3,000 increase in the annual Isa allowance, announced by Chancellor Alistair Darling last week, should have offered a glimmer of hope for savers. But with the changes not taking effect until October for the over 50s, and those under the age of 50 having to wait until 6 April next year, savers were left feeling disappointed.
And with returns on savings dwindling because of the recent interest rate cuts, a post-Budget poll on moneysupermarket.com found that 61% of savers feel that the increase in the Isa allowance isn't enough and that the Chancellor should have done much more to help them. A further 23% said they felt the increase was a welcome small step, but that further measures to improve the plight of savers are needed.
earn more interest
Cash ISAs
Interest rates on cash Isas is tax-free, which makes them highly valuable savings option in the current low interest rate environment.
Presently, you can invest up to £3,600 each tax year in a cash Isa, although this will increase to £5,100 for the over-50s from 6 October (and for everyone else, from next April next year). This is only 50% of the annual Isa allowance – you can invest up to £7,200 in total, rising to £10,200 once the new higher limit is introduced.
Qualifying for the new higher limit this year doesn't mean you have to wait until October before you can make use of your Isa allowance – you can pay in up to £3,600 now and top up the remainder later in the year. However, if you are opening a new Isa account, check with the provider that additional deposits can be made. This won't be a problem if it's an easy-access account but fixed-rate deals often only permit a single deposit.
The leading cash Isas are paying 3.0% or more. Barclays Golden Isa is offering the highest rate at 3.61%, although this includes a 1% bonus which only lasts for 12 months. Alternatively, if you have a NatWest or Royal Bank of Scotland current or instant access savings account, you qualify for their Cash Isa Plus accounts paying 3.51%.
However, none of these accounts permit transfers so you can only invest this year's Isa allowance. If you also have money invested from previous tax years that you want to move into a higher-paying account, NatWest's e-Isa has the highest rate at 3.25%. As with its Cash Plus Isa though, you must have a NatWest current or instant access savings account to qualify.
Alternatively, first direct's e-Isa and Marks & Spencer Money's Advantage Cash Isa accept transfers and are paying 3.10%. Another option is the Halifax Isa Direct Reward at 3.0%.
by Kevin Mountford, head of banking at moneysupermarket.com 27 April 2009
