Which? has found that many savings providers have reduced their rates on variable rate cash Isas, or plan to do so soon, hitting the benefits available from the increase in the tax-free savings allowance.
The cuts by 13 cash Isa providers follow the launch of the new Isa, which has an increased allowance of £15,000, and potentially undermine some of the benefit of the increased allowance.
On 1 July, Harpenden Building Society cut the rate on its Simply Isa from 2.25% to 1.5%, Cambridge Building Society reduced its Instant Access Isa for savings of £10,000 from 1.3% to 0.7% and Tesco Bank’s Isa standard rate for existing customers fell from 1.75% to 1.25% (a 0.5% bonus will apply for six months).
Another 10 providers have cut rates or plan to; seven by 0.25%, two by 0.20% and one by 0.05%.
In contrast, just four providers have increased rates on variable rate cash Isas. BM Savings’ Isa Extra is up from 1.25% to 1.55% (inclusive of 12-month, 1.05% bonus), making it the top-paying instant access Isa, alongside KRBS.
Halifax, Sainsbury’s Bank and Virgin Money have also boosted rates by 0.20%, 0.10% and 0.15% respectively.
Go further: Best rate cash Isas – find the top cash Isa deals available
New fixed rate Isas
Some providers have launched fixed-rate products for those willing to lock away money to get better interest. KRBS, Britannia and Saga have introduced one-year cash Isas paying 1.75%, 1.71% and 1.55% respectively.
On two-year products, KRBS pays 2.10%, Britannia 2.05%, and Barclays 2.02%. For three year deals, Clydesdale Bank and Yorkshire Bank offer fixed-rate Isa rates of 2.45%.
All these products accept transfers in. Remember that if you lock away the money on a fixed rate it will not benefit from any rise in interest rates.
Go further: 2 year fixed rate cash Isas – the best rates for two year fixed Isas
Scrap the savings trap
Which? executive director Richard Lloyd said: “By cutting rates, banks and building societies are undermining the benefits of the Government’s Isa reforms. We want providers to scrap the savings trap and help their customers make the most of their money.”
Which? is asking banks to:
• Stop leaving customers languishing in sub-standard savings accounts and instead move their money into one default easy-access or Isa account at the end of fixed terms.
• Stop making Isa switching complicated and limiting transfers.
• Stop leaving customers in the dark about the best return on their savings and instead display interest rates prominently and improve notifications about the end of bonus rates or fixed terms.
Go further: Scrap the savings trap – sign our petition to help savers get a better deal