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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
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

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Recruitment Genius: Experienced Financial Advisers and Paraplanners

    Negotiable: Recruitment Genius: This extremely successful and well-established...

    Guru Careers: FX Trader / Risk Manager

    Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

    Day In a Page

    Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

    Making of a killer

    What motivated a shy student to kill 38 holidaymakers in Tunisia?
    UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

    Just when you thought your commute couldn't get any worse...

    Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
    Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

    The Real Stories of Migrant Britain

    Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
    Cheaper energy on the way, but it's not all sunshine and rainbows

    Cheaper energy on the way, but it's not all sunshine and rainbows

    Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
    Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

    No grace of God for Katy Perry as sisters act to stop her buying convent

    Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
    Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

    Residents just want water and power in a city chosen to be a ‘smart’ metropolis

    The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
    Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

    Something wicked?

    Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
    10 best sun creams for body

    10 best sun creams for body

    Make sure you’re protected from head to toe in the heatwave
    Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

    Nick Bollettieri's Wimbledon files

    Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
    Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

    There is more than a shiny trophy to be won by England’s World Cup women

    The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
    How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

    How to stop an asteroid hitting Earth

    Would people cooperate to face a global peril?
    Just one day to find €1.6bn: Greece edges nearer euro exit

    One day to find €1.6bn

    Greece is edging inexorably towards an exit from the euro
    New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

    'Iron Man' augmented reality technology could become reality

    Holographic projections would provide extra information on objects in a person's visual field in real time
    Sugary drinks 'are killing 184,000 adults around the world every year'

    Sugary drinks are killing 184,000 adults around the world every year

    The drinks that should be eliminated from people's diets
    Pride of Place: Historians map out untold LGBT histories of locations throughout UK

    Historians map out untold LGBT histories

    Public are being asked to help improve the map