By ADRIAN LOWCOCK 18/08/2009
Cash ISA interest rates have trailed behind what is available in the fixed rate bond market, as seen in a recent survey carried out by Defaqto. This is obviously bad news for savers, as lower rates reduce the benefits that Cash ISAs offer.
However, once the tax relief has been taken into account, the returns on Cash ISAs are still a better bet than holding your money outside of an ISA. If you add in the likelihood that taxes will rise in the future and the fact that banks will get more competitive with their interest rates, ISAs still remain the first port of call for investors and savers.
Savers need to take control and look for the best deals, price comparison websites such as Moneyfacts.co.uk allow you to compare current rates and terms. There are also certain points during the year when competition between the banks increases - the end of the tax year being the main one. During this tax year, savers aged over 50 will be able to increase their allowance by £1,500 from 6th October 2009 and we are likely to see better rates offered at then.
Investors can also transfer their existing Cash ISAs into other accounts with better rates. It is worth reviewing them regularly to ensure you are getting the best rates available. Alternatively, investors can transfer Cash ISAs into Stocks and Shares ISAs which maybe suitable if you are looking to enhance returns.
If you would like to discuss any of the issues in this article please call one of our Advisers on 020 7189 9999.