8th March 2016
Traditionally, this is the time of year when ISA providers boost their offerings to entice savers who have yet to use their full ISA allowance to invest before the current tax year ends.
However, Moneyfacts.co.uk research shows that this year’s ISA season has yet to bear fruit, with savers now facing some of the worst ISA rates on record.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, says: “ISAs were once the go-to product for savers as they offered not only tax benefits but also some of the better rates on the market.
“However, this is certainly no longer the case thanks to almost constant rate decreases. For instance, the best easy access ISA rate has dropped by 0.10% in just six months, making this perhaps the worst ISA season on record.
“This is a devastating by-product of schemes such as the Funding for Lending initiative – providers simply don’t need savers’ money at the moment, and as a result, rates have fallen, with top deals being available for only a short period of time before slowly disappearing down the Best Buy tables. This is extremely disappointing and undoubtedly leaves many savers wondering if an ISA is even worth the trouble.
“The Personal Savings Allowance (PSA), which is due to come into place in April, seems to have only exacerbated the downward slide in ISA rates. After April, £1,000 of interest earned will be tax-free, which means that the importance of getting an ISA each tax year has reduced considerably. However, relying on the PSA alone for your tax-free pot is a gamble – eventually rates will go up, and the amount savers can save tax-free will subsequently diminish.
“For this reason ISAs shouldn’t be overlooked, particularly if you have larger amounts to save. In addition, ISAs can be passed on to spouses after death, which is worth contemplating when weighing up your long-term interests.
“If we do have an ISA season this year it’s likely to be short-lived with rates only rising slightly, if at all. Savers looking for an ISA therefore need to act fast to secure their chosen deal before it becomes oversubscribed and has its rate reduced.”
See table below: