Money Insider: Investec doubles up with rates that track best buys

 

It's been a hectic week on the savings front, with much of the activity in the ISA sector. However, away from the jostling in the tax-free best buy tables, there was an eye-catching return to the savings arena from Investec Bank.

The bank launched two new versions of its popular High 5 account, albeit this time one of them is now labelled the High 10.

These accounts are unique in that the rates are independently assessed and adjusted on a weekly basis, judged against the best savings rates in the market, with the High 5 looking at the top five best buys and the High 10, the top ten best buys across a range of savings types.

Whilst the minimum balance will be out of reach of many savers at £25,000, the beauty of these accounts is that you are guaranteed an excellent rate compared with the market, and even though some of the competition will have a short-term introductory bonus, this won't affect the rate on the High 5 or High 10. As a result you won't need to worry about chasing rates or having to switch to a new deal every six or 12 months.

The High 5 account (issue 2) is currently paying 3.17 per cent and you need to give six months' notice for withdrawal. The High 10 is paying slightly less at 3.11 per cent but requires only half the notice period at just three months. Both accounts have a maximum balance limit of £100,000.

When you consider that most fixed-rate bonds with a six-month term are paying less than 2 per cent, these accounts offer good value; in fact I could find only one such bond with a higher return than the Investec accounts, which is from FirstSave, paying 3.28 per cent on a minimum balance of £5,000.

Despite no movement in the base rate for three years now, it's good news that we're seeing signs of increased competition in the savings market, helping to maintain rates at a much higher level than at this time last year.

High-paying junior ISA has strings attached

The end of the tax year is fast approaching and in just 48 days the 2012-13 tax year kicks off.

From what I've seen over the past couple of weeks the banks and building societies are already working flat out to ensure they grab a decent share of the action.

It's headline rates that tend to catch people's attention, so you can imagine there were plenty of eyebrows raised this week when Halifax said it would pay 6 per cent on a Junior ISA – double the rate that most accounts currently offer. A rate so out of kilter with the rest of the market usually comes with some strings attached, and the Halifax offer is no exception.

To qualify for the enhanced Junior ISA rate, one of the child's parents must also hold an ISA product with Halifax.

If you compare the Halifax ISA Saver Online, which pays 2.6 per cent, against the current market leader from Nationwide Building Society at 3.1 per cent, and invest £5,340 for 12 months, you'll be £26.70 worse off with the Halifax. However, in this instance you need to consider the combined result of holding both an adult account and the Junior ISA, as someone with the Nationwide best buy would be able to earn a maximum of only3 per cent on the junior account.

If you open the Halifax Junior ISA at 6 per cent and fund it with at least £900, the net effect is that you'll recoup the £27 you're losing on the adult ISA deal.

So if you're using the full adult ISA allowance in an easy access account, the Halifax Junior ISA is really only worth considering if you're investing £900 or more.

However there are some very competitive longer-term fixed-rate ISAs from Halifax, particularly the four-year option at 4.1 per cent and the five year rate at 4.2 per cent.

If you're only in the market for an adult ISA and want the flexibility of instant penalty-free access, the Online ISA (issue 3) from Nationwide currently tops the best buys at 3.1 per cent. There is a minimum balance requirement of £1,000.

Andrew Hagger, Moneynet.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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