With a little over three weeks of the current tax year remaining, the new ISA deals are coming thick and fast, although most are offering returns that hardly warrant a mention.
The best of the tax-free savings accounts to appear on the shelves this week came from Barclays in the form of its Golden ISA 2, paying a healthy 3.1 per cent AER. This is the fourth year running that Barclays have offered one of the top-paying instant access variable rate ISAs, however as with the table-topping 3.5 per cent Santander deal, it doesn't offer the facility to transfer in previous years' accumulated ISA balances.
It may be that providers are conscious that offering a combination of a market-leading interest rate and ability to transfer could result in a deluge of applications in a short timeframe which could lead to less than acceptable service levels.
The problem is that even though you can make same-day transfers when transacting online, the method of switching ISA balances from one provider to another is very basic.
Rules from HMRC state that monies must be transferred from the original ISA provider to the new ISA account within 30 calendar days. However due to cost implications, providers don't have an automated process set up by which to facilitate these transfers, and unbelievably in this day and age, the process is very much a manual one.
A customer will approach their new ISA provider and complete a transfer request, which is submitted to the bank/building society where their existing ISA is; that provider then arranges for the account to be closed and a cheque posted to the new bank for the balance.
Because most of the ISA activity is compressed into such a small window of activity, this archaic system becomes even slower, with a rush of applicants chasing best-buy rates, but with insufficient resource provided by the banks, the manual systems are unable to cope with the level of demand.
It is astonishing that much of the ISA transfer process is still completed by hand; unfortunately it's another example of banks putting cost considerations before the needs of customers.
The real downside for savers is that because of these hold-ups they are losing interest. For example, if you had a £3,600 balance, 30 days at say 3 per cent would see you losing £8.87 in interest, but if you had the maximum ISA balance of £43,200 the delay in switching funds will cost a staggering £106.52.
Northern Rock boosts bond rates now 100% guarantee is gone
Following the recent announcement that the 100 per cent state guarantee on Northern Rock savings balances would end on 24 May, it was interesting to see the bank increasing rates on its one- and two-year fixed rate bonds.
Whilst variable rate savers are still fully protected until 24 May and existing fixed rate accounts until maturity, any new fixed rate accounts do not come with this added level of comfort.
The one-year bond now offers the fourth highest rate in that particular category following a hefty 0.4 per cent increase from 2.75 per cent to 3.15 per cent. The two-year bond, which is not quite as competitive, also saw a sizeable increase from 3.2 per cent to 3.5 per cent.
With the removal of the savings guarantee for new deposits, it's not all together surprising to see these substantial rate increases from Northern Rock at a time when a number of short-term fixed rates have been cut or withdrawn completely.
With new fixed rate deposits no longer eligible for the 100 per cent guarantee, the bank now has to compete on a level playing field, and will need to fight for business with competitive rates if it is to retain and grow its savings market share.
It will be interesting to see whether these rate increases will be sufficient to entice customers to remain loyal to Northern Rock with the lesser safety net of £50,000 courtesy of the FSCS, in line with the rest of the savings market.
Rates for savers of all types are still being eroded, and this week saw the Barclays Monthly Savings account interest rate cut by 1 per cent to 3.25 per cent AER, while the best buy "in credit" current accounts from Alliance & Leicester and Santander saw their 12-month introductory interest rates drop from 6 per cent AER to 5 per cent AER on the first £2,500. They are both still market leaders, however if you always keep your current account in the black and can pay in at least £1,000 per month, the Reward account from Halifax, paying £5 net each month, is beginning to look an attractive longer-term alternative.
Andrew Hagger is a money analyst at Moneynet.co.ukReuse content