Last post plays for Abbey's acclaimed ISA

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The Independent Online

It feels like the end of an era. For some time now, Abbey's postal mini cash individual savings account (ISA) has been a heavyweight contender. Launched in 2002, it has paid a tax-free rate of interest generous enough to push it near the top of many best-buy tables. Recently, the rate rose as high as 5.35 per cent.

It feels like the end of an era. For some time now, Abbey's postal mini cash individual savings account (ISA) has been a heavyweight contender. Launched in 2002, it has paid a tax-free rate of interest generous enough to push it near the top of many best-buy tables. Recently, the rate rose as high as 5.35 per cent.

The Abbey ISA won a following among the independent financial advisers on our "wealth check" page, who routinely recommended that our makeover volunteers switch their cash into this account.

Unfortunately, many others took this advice too, and last November Abbey ran into difficulty. Struggling to cope with the deluge of applications, it amassed a backlog of over 15,000, prompting angry customers to contact its call centres.

And now the popular account is no more: yesterday, Abbey closed it to new business.

In its place comes a new issue of the bank's postal cash ISA. Launching on Tuesday, this pays a less spectacular 4.9 per cent. That still makes the account a respectable home for your £3,000 mini cash ISA allowance, but there are plenty of better deals out there.

These include National Counties building society, paying 5.5 per cent, and a mini cash ISA from Alliance & Leicester (A&L) that pays 5.4 per cent but is operated only via the phone and web, not through a branch.

The best way to ensure that your money works hard for you is to keep a close eye on the interest earned. Banks and building societies may offer top rates for your custom, but these often edge down quietly over time.

Fierce competition between providers means it will always be worth keeping an eye out for attractive new rates as they come on to the market. But check for bonuses that fall away, usually after six months.

If you once banked mini cash ISA money in an account but have forgotten about it since, there's a good chance it will be languishing on an unhealthy rate - probably well below the 4.75 per cent Bank of England base rate. For example, less than £3,000 in a Co-op cash ISA earns only 3.75 per cent.

If you switch, you won't lose your tax-free allowance as long as you contact your new cash ISA provider first to carry out the transfer for you. There isn't usually a fee for switching but always check: Alliance & Leicester levies £25 and National Counties a 10-day loss-of-interest penalty.

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