Time to move if you want full benefit of ISAs

As tax-free savings deadline looms, make sure you review old accounts

New year resolutions may have been nearly forgotten but if sorting out your finances was on the list, pay attention because the ISA (Individual Savings Account) season is upon us.

The past week or so has seen a flurry of launches with new fixed-rate ranges from Santander and Leeds Building Society, plus a new Junior ISA from Lloyds TSB and, this week, a new ISA from M&S Money.

The banks must be feeling a little more generous this year too; the average top five cash ISA rate is up 7 per cent, rising from an average rate of 2.83 to 3.03 per cent, according to MoneySupermarket.

With just a few months until the end of the current tax year, if you haven't maximised your ISA allowance, a not-too-shabby £5,340 can be invested in a cash ISA, increasing to £5,640 for the 2012/13 tax year. So now is the time to start looking because if you don't use it, you lose it.

"Despite the end of the tax year being two months away, it is great to see that the top paying rates on cash ISAs are already ahead of those from the same time last year," says Kevin Mountford, the head of banking at MoneySupermarket.

"Anyone who has not opened an ISA yet can take advantage of these great rates and benefit from two months' interest rather than wait until the last minute to use their allowance."

A high rate is offered by the Cheshire BS Direct Cash ISA (issue 1) paying 3.06 per cent. However, this includes a 2.06 per cent bonus until 30 September 2013, so you will need to switch again when this comes to an end. The account can be opened with a minimum deposit of £1,000 (by cheque) and access is by post only, so while this isn't a fixed-rate account, it doesn't really fit the bill for instant access.

For the sake of a tiny drop in the rate, the AA's Internet Access ISA pays 3.05 per cent (including a 1.35 per cent bonus for one year) on minimum deposits of just £500 and can be operated online. The new offering from M&S is also worth a look, paying 3 per cent, with no fixed term. It also has a cash ISA with a one-year term paying 3.25 per cent.

Advisers suggest that if opening a new account now, you put a note in your diary to review any of these accounts next year and see how they fare against the latest deals.

"When you buy a new ISA, set yourself a reminder to review it when that maturity rate comes to an end. Once that drops off, the rate could be very poor and the onus is on you as an investor to do something about it," says Adrian Lowcock from independent financial adviser Bestinvest.

If you have savings in previous years' ISAs, it is also important to give these the once over as there is a good chance your money is languishing in an account paying a lowly rate. Switch to a best buy and make it work much harder. Top rates here are available from Newcastle BS and Virgin paying 3.05 per cent and 2.85 per cent respectively on balances of £1 but remember to follow the ISA switching rules.

As soon as a new tax year starts on 6 April, you are free to put that entire year's allowance in an account but you can only open a cash ISA with one provider in a tax year. However, you are free to hold various cash ISAs from previous years with different providers, so each year you can pick the top-paying accounts, regardless of who is providing them.

Crucially, you are free to transfer your old ISA money but you will need to check that the account you forward to allows transfers in. Never simply take out the cash and deposit it directly as you'll lose the tax-free benefits. You can even split old ISA money between different providers or between cash and shares ISAs.

If you're willing to lock your money away for five years, you can increase your rate to 4.25 per cent with the BM Savings Fixed Rate Isa Saver (postal account).

If five years seems like a stretch too far, the best-buy rates fall to: 4.1 per cent with the Halifax four-year fixed; 3.8 per cent with a three-year fixed from Aldermore (it also has a one-year product); and 3.6 per cent with the Post Office's two-year fixed. All of these accounts also allow transfers in from previous years.

If you only want to fix for one year, Metro Bank pays 3.25 per cent from £1 upwards and can be accessed through the post or branches. Alternatively, Leeds BS pays the same rate from £1 but does not allow transfers from previous years.

Despite some good rates on offer now and the opportunity to earn two months worth of interest, if you're in no hurry to get moving and you are confident you won't forget nearer the time, Rachel Springall from Moneyfacts.co.uk says it may pay to hold off for a few weeks and see if any of the big players bring out better offers.

"The majority of the best buy ISAs tend to appear around mid to late March when the ISA season is in full swing. In previous years, ISA providers (often the larger names) have tended to wait to see what new deals their competitors launch before showing their hands," she says.

Expert View

Adrian Lowcock, Bestinvest

"Each year make sure that you are keeping on top of all your Individual Savings Accounts. The key to getting the most from your tax-free income is making sure that you have found the best products and transferring old ISAs should be part of this process. Old ISAs are more important than this year's ISAs in some respects – how many thousands could you have lying around that are not earning you much?"

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

Suggested Topics
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Arts and Entertainment
James Hewitt has firmly denied being Harry’s father
arts + ents
Arts and Entertainment
Jamie Oliver
filmTV chef Jamie Oliver turned down role in The Hobbit
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
Life and Style
tech
Arts and Entertainment
Jeremy Clarkson, left, and Richard Hammond upset the locals in South America
tvReview: Top Gear team flee Patagonia as Christmas special reaches its climax in the style of Butch and Sundance
News
people
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
News
news
Arts and Entertainment
Peter Mayhew as Chewbacca alongside Harrison Ford's Han Solo in 'Star Wars'
film
News
i100
Arts and Entertainment
Man of action: Christian Bale stars in Exodus: Gods and Kings
film
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Catherine (Sarah Lancashire) in Happy Valley ((C) Red Productions/Ben Blackall)
TV
Arts and Entertainment
Clueless? Locked-door mysteries are the ultimate manifestation of the cerebral detective story
booksAs a new collection of the genre’s best is published, its editor explains the rules of engagement
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Selby Jennings: Quantitative Research | Equity | New York

    Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

    Selby Jennings: SVP Model Validation

    Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    Day In a Page

    A timely reminder of the bloody anniversary we all forgot

    A timely reminder of the bloody anniversary we all forgot

    Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
    Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

    Homeless Veterans appeal

    Former soldiers pay their respects to a friend who also served
    Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

    Scarred by the bell

    The downfall of the TV star charged with bar stabbing
    Why 2014 was a year of technological let-downs

    Why 2014 was a year of technological let-downs

    Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
    Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

    Will revolutionary Cuba take 'bourgeois' golf to its heart?

    Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
    The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

    The Locked Room Mysteries

    As a new collection of the genre’s best is published, its editor explains the rules of engagement
    Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

    How I made myself Keane

    Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
    Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

    Parting view of Ofcom chief... we hate jokes on the disabled

    Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
    A look back at fashion in 2014: Wear in review

    Wear in review

    A look back at fashion in 2014
    Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

    Ian Herbert: My 10 hopes for sport in 2015

    Might just one of them happen?
    War with Isis: The West needs more than a White Knight

    The West needs more than a White Knight

    Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
    Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

    'The day I was shot by the Taliban'

    Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
    Revealed: the best and worst airlines for delays

    Revealed: the best and worst airlines for delays

    Many flyers are failing to claim compensation to which they are entitled, a new survey has found
    The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

    The stories that defined 2014

    From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
    Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

    Disaster looming? Now you know where to head...

    Which British city has become the first to be awarded special 'resilience' status by the UN?