Leeds BS hikes interest rate on fixed ISA ahead of deadline
With the ISA allowance deadline fast approaching for the current tax year, savers are being urged to check they’re investing in the accounts offering the best possible returns. Leeds Building Society has hiked the interest across its ISA range, with its one year fixed account now offering a more competitive new Annual Equivalent Rate (AER) of 4.1 percent.
Cash ISAs come with additional perks and benefits, as these accounts allow savers’ money to grow without the need to pay tax on the interest above the Personal Savings Allowance (PSA).
Deals offering a fixed rate can also help add certainty to saving, as the interest rate gets locked in the rate offered at the time of opening.
However, cash ISAs can come with a few more restrictions, such as penalty charges for early access or transfers, or a specific deposit amount required per month. This makes it a better option for those who can afford to put money away for longer periods of time without dipping in.
The Leeds Building Society One Year Fixed Rate Cash ISA (Issue 182) can be opened with a minimum deposit of £100 and interest is calculated daily and paid on maturity on April 30, 2024.
It can be opened in branch, via post or online and further additions can be made until the end of April.
But, while early access is allowed, it will result in a 60-day loss of interest penalty. Also, If the balance falls below £100, the rate of interest will drop to 0.05 percent.
But while Leeds BS is offering a much more competitive rate, it isn’t quite topping the table. Santander and Virgin Money are currently taking the lead with AERs of 4.15 percent and 4.11 percent, respectively.
Santander’s One Year Fixed Rate ISA can be opened with a minimum deposit of £500 and interest is calculated daily and paid annually or at maturity.
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People can also secure a £50 e-voucher when they transfer in a non-Santander ISA of £10,000 or more to the account. Partial withdrawals aren’t allowed. Instead, money can be withdrawn by closing the account and there is a penalty equivalent to 120 days’ interest if this happens before the term ends.
The Virgin Money One Year Fixed Rate Cash E-ISA (Issue 560) can be opened with just £1 and interest is applied annually on August 5.
Withdrawals are permitted but will be subject to a charge equivalent to 60 days’ loss of interest on the amount withdrawn.
With less than one week until the new tax year, new research has revealed that 39 million UK adults could be set to miss out on the deadline to use their ISA tax-free allowance, which currently stands at £20,000 per person.
In a survey of 2,000 UK adults conducted by CapitalRise and 3Gem earlier this month, just a third (34 percent) understood the tax benefits of ISAs, up from a quarter (27 percent) in 2019 when CapitalRise conducted a comparable survey.
This year, only 29 percent knew that ISAs could be an investment, not just a savings tool, while just 14 percent of respondents knew which provider to turn to in order to open different product types (cash, stocks and shares, lifetime and innovative finance).
Crucially, ISA account holders can save or invest up to £20,000 tax-free every tax year (April 6 to April 5), keeping the full amount in one type of ISA or split across different products.
Despite ISA popularity marginally increasing, they still remain highly underutilised as both a saving and investment tool. Almost half (46 percent) of respondents report that they did not put any money into ISAs this tax year.
Based on ONS data, this equates to roughly 39 million people when applying the findings to the wider population.
Uma Rajah, CEO and co-founder of CapitalRise, said: “With the new tax year fast approaching on April 6, time is running out to use this year’s tax-free ISA allowance. It is important to do your due diligence, as there are several types of product that all work differently.
“At times like these, it is especially important to check your money is working as hard as it can for you.
“ISAs are a tax-efficient way of building savings and investments, but with [survey] findings showing a significant portion of the population is unaware of the key benefits and differences between the ISA types, it is clear that they hold huge untapped potential.”
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