Tax-Free savings: Hunting for the best interest rates
Faith Glasgow on where to go for the top-paying accounts
Sunday 30 May 1999
Interest rates have dwindled steadily, however. Indeed, with rates hovering around 5.5 per cent before tax (Bristol & West's Easy Access Plus,at 6.20 per cent, is the best of the bunch), it makes a lot of sense to tuck away as much as you can in a tax-free account.
Until 5 April, the obvious choice was a Tessa account. New Tessas are no longer available but the capital (though not the interest) in maturing Tessas can be reinvested within six months after it matures in a Tessa- only ISA.
In the current year, only pounds 3,000 can be invested in a cash-only ISA, so for any CAT-marked product (complying with government guidelines on Charges, Access and Terms) you can keep the account running indefinitely and withdraw money without penalty.
However, while CAT-standard plans are more easily comparable, you'll find a wider range of non-CAT-standard products, including notice accounts, fixed terms and fixed rates.
Keep an eye out, though, for headline rates artificially boosted by initial bonuses. For example, Skipton Building Society pays 6.6 per cent, but that includes a 0.5 per cent bonus that will cease from 5 January next year.
The current best rate of 6.5 per cent on CAT-standard cash ISAs comes from Nationwide on deposits from pounds 1 upwards; Alliance & Leicester and Halifax offer the same rate, but only on the full pounds 3,000 allowance. The top rate is a non-CAT-marked account from Norwich & Peterborough, paying 6.75 per cent on a minimum investment of pounds 3,000 (pounds 1,000 for existing customers).
Once you've used up your pounds 3,000 ISA allowance, the other obvious tax shelter for deposits is National Savings, the government's own range of savings opportunities, several of which are tax-free. Indeed, National Savings has added to its menu with a CAT-standard mini cash ISA, offering 5.75 per cent. It is not the best rate but it is backed by the UK Treasury.
The index-linked saving certificate is a five-year investment paying 1.65 per cent over inflation (currently 2.4 per cent), a total of 4.05 per cent per year tax-free. That equates to 6.25 per cent gross for higher rate taxpayers.
Children's Bonus Bonds, which can be bought for children up to the age of 16, are a useful way for parents to put aside money at a fixed rate. The current annual rate amounts to 4.65 per cent if the bond is held to maturity.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...