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Keep your eyes on the Isa fine print
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The Isa season is in full swing: attractive rates are being offered by banks which need your savings more than ever due to the credit crunch. But are the best buys too good to be true? Find out what you should look for in the fine print
Interest rates are being advertised for individual savings accounts (Isas) which are well above the current bank rate of 5.25% – Barclays Bank is currently at the top of the pile, offering an annual equivalent rate (AER) of 6.5% with its Tax Haven Isa.
But before jumping at the highest rates and choosing a new Isa provider you should watch out for restrictive conditions.
One in seven Isas don’t allow you to transfer the money you already have saved in another Isa, according to Moneysupermarket.co.uk. This includes two of the five “leading” accounts, with high market rates such as Barclays’ Tax Haven Isa.
“With the average transfer balance of Isas at £12,000, savers need to look carefully at the transfer conditions,” says Reza Attar-Zadeh, director of savings and investments at Abbey.
“By not allowing transfers in customers cannot benefit from a leading rate and are restricted to tax-free benefits of these rates on just £3,000 this year, and £3,600 next.”
Earn more interest
Restricted access to your money
Restrictions exist not only on how much of your savings can be used to take advantage of the top rates, but also on how easily you can access your money once it’s invested.
One in 11 accounts has strings attached to transferring money out, raising the possibility of you facing charges or restrictive conditions.
Some catches to be wary of include needing to give notice to access your money, an administration fee for the amount transferred, or being subject to a charge when making a withdrawal.
Restrictive conditions mean it’s harder to make the most of your tax-free allowance, but with so many Isas out there you should be able to find an account which offers a comparable rate with less restrictions.
By Martin Pegan
