ISA Savers Risk Losing £500M by not Switching to Better Deals

Mar 11, 2013, 15:48 ET from

CHESTER, England, March 11, 2013 /PRNewswire/ --

  • ISA savers with cash ISA bonus rates due to expire should shop around and avoid remaining on low rates
  • Savers could earn over £120 extra on their savings pot by doing so

ISA savers risk losing up to £500 million* this year by not switching to a better deal once the bonus rates on their existing accounts expire, according to analysis by

The UK's number one comparison website compared the top ten ISA rates offered in March 2012** which have bonuses due to expire, and found savers could see their interest rate fall to as little as 0.25 per cent once the bonus no longer applies. This is ten times lower than the current market leading instant access ISA rate of 2.50 per cent.

For example, someone who had invested the full cash ISA allowance for the 2011/12 tax year of £5,340 in the Halifax ISA Saver online, which offered an AER of 3 per cent in March 2012, earning £160 in interest, would now find their twelve month bonus rate of 2.75 per cent coming to an end. Failing to take action and switch to a higher paying ISA rate would leave them languishing on a rate of just 0.25 per cent AER, or a return of only £13.35 on their savings balance in the next twelve months.

By switching an existing ISA balance to a market leading deal which allows transfers in, savers could really help maximise their savings pot. The Cheshire Building Society cash ISA account, for example, currently offers 2.5 per cent AER when you transfer an ISA balance, and would mean interest earned would be £137.50 - an extra £124 for someone transferring the existing balance.***

Kevin Mountford, head of banking atMoneySupermarket  said: "If you have funds in an existing ISA and have held this for more than 12 months then the chances are, you will be receiving a rate far lower than you can receive on the current leading products in the market. It is therefore vital that ISA savers check the current rates paid on their ISA and be prepared to switch. The majority of banks are not proactive when it comes to making sure you are on the best deal, so it pays to be savvy and not let them get away with it. The difference between the average and top paying rates can be significant, and with less than four weeks to go until the end of this current tax year ends on 5th April, savers should look to make the most of their tax efficient ISA allowance, which for cash ISAs this tax year is £5,640. Moving to a better deal can go a long way to help maximise returns.

"Switching an existing ISA balance to a market leading deal which allows transfers in can help maximise your savings. Despite low interest rates, the amount of money you can earn by doing so can be significant. However, make sure you follow the official ISA switching rules and watch out for any penalties or charges for doing so. Savers planning to switch ISA accounts should avoid withdrawing the cash- as it will lose its tax-free status. Instead, speak to your provider about arranging the transfer instead, or face losing your tax advantage."

For anyone looking for more information on ISAs visit the MoneySupermarket ISA event.

Notes to Editors:

MoneySupermarket's Guide to ISA transfer Infographic

*Based on 2011-12 ISA subscription figures -

Total amount invested into cash ISAs in 2011/12 was £37,685m. At an average top 10 rate of 3.16% this would earn £1,187,077,500 (£1.2bn) in interest. Once bonus rates expire, the interest earned will be 1.82% earning £685,867,000 - a difference of £501,210,500 or £501million.

**ISA bonus rates 2012 and 2013

    2012 top 10 ISAs with bonus- based on GBP5,340
          Provider          (Terms & Conditions Apply)    Minimum    AER Bonus   Bonus
                             Super Direct ISA Issue 5     Deposit                Period
                          (existing investment customers
    Santander                         only)               GBP1      4.00% 3.50%  12 months
    Santander                   Direct ISA Issue 9        GBP2,500  3.30% 2.80%  12 months
    Cheshire BS             Direct Cash ISA (Issue 1)     GBP1,000  3.16% 2.16%  30/09/2013
                                Loyalty Reward ISA
    Barclays                (existing customers only)     GBP1      3.05% 1.00%  12 months
    Newcastle BS          Newcastle Bonus ISA (Issue 2)   GBP1      3.05% 0.95%  31/07/2012
    The AA               AA Internet Access ISA (Issue 2) GBP500    3.05% 1.35%  12 months
    NatWest                           e-ISA               GBP1      3.00% 1.00%  12 months
    ING Direct                 ING Direct Cash ISA        GBP1      3.00% 1.96%  12 months
    Halifax                      ISA Saver Online         GBP1      3.00% 2.75%  12 months
    Market Harborough BS    2011 Brighter ISA Issue 9     GBP5,340  3.00% 0.75%  12 months
                                                          Average   3.16% 1.82%

    Provider            (Terms & Conditions Apply)    Minimum        AER  Bonus Bonus
                                                      Deposit                   Period
    First Trust Bank    Cash ISA                      GBP50         2.50% N/A   N/A
    Cheshire BS         ISA Saver (Issue 1)           GBP1,000      2.50% 2.00% 31/07/2014
    Tesco Bank          Instant Access Cash ISA       GBP1          2.30% 0.30% 12 months
    Stafford Railway BS Cash ISA                      GBP1          2.25% N/A   N/A
                        Preferential Variable Rate
                        Cash ISA
    HSBC                (existing customers only)     GBP1          2.25% 1.98% 12 months
    Harpenden BS        Simply ISA                    GBP1          2.25% N/A   N/A
    ns&i                Direct ISA                    GBP100        2.25% N/A   N/A
    GE Capital          GE Saver Cash ISA             GBP500        2.25% N/A   N/A
    Darlington BS       Rolling Tracker Cash ISA 2    GBP500        2.25% N/A   N/A
    Virgin Money        Easy Access Cash eISA Issue 4 GBP1          2.15% N/A   N/A
                                                      Average       2.29% 2.00%

Source: MoneySupermarket 8.3.13

*** £5,500.20: Calculated for someone using the full 2011/2012 tax year allowance of £5,340 with a savings rate of 3 per cent= £160.20 in interest. compares (at 30th Jan 2013)

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