By ADRIAN LOWCOCK 16/05/2009
This time last year many of the high street banks were offering very good rates for your cash ISA – as much as 7% if you chose a fixed rate for a year. With many of these fixed term products coming to end soon, savers are likely to be in for a bit of a shock as their Cash ISAs move to rates as low as 0.1%. The banks still desperately want your money, but they rarely offer the most attractive terms to their existing savers. Even some ‘high interest’ accounts are offering a paltry 0.1% p.a. on balances in excess of £10,000.
All is not lost. There are several things you can do to avoid your money languishing in a tax-free but low rate ISA account. Whilst getting 7% p.a. is implausible in the current climate, if you shop around you could transfer your ISA to another bank and there are rates as high as 4% p.a.
One point to remember is that the most attractive rates are for relatively long fixed terms: 4% might be attractive now, but will be much less so if interest rates start to rise during the next four years.
Transferring a cash ISA from one provider to another does not affect the tax free status of your ISA allowance for this tax year. We recommend investors hunt around for the most attractive rates. Websites such as Moneyextra.com or Moneyfacts.co.uk are a good source of basic information. Bestinvest can also offer cash ISAs where the money is readily available and is not tied up for long periods. Click here to find out more.
Alternatively, you may feel that now is the time to take advantage of the freedom to transfer your cash ISA into a Stocks and Shares ISA. Again, this doesn’t affect this tax year’s ISA allowance.
A Stocks and Shares ISA provides you with access to a wider range of assets with the potential for greater returns. There are funds investing in corporate bonds that offer well in excess of 5% tax free income, on top of which you could also benefit from tax free capital growth.
Why not speak to one of our advisers to discuss how to get the best out of your ISA for this year or to transfer your cash ISA to a better rate?
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