Newcastle Building Society launched a new single-access ISA this week paying a five percent interest rate, earning an “excellent” Moneyfactscompare rating.
Savers need just £1 to launch the account and interest is paid on the anniversary of opening.
The new ISA deal came ahead of the new tax year, which starts today (April 6). This marks the restart of savers’ £20,000 tax-free ISA allowance.
Commenting on the deal, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “Newcastle Building Society has launched a new Single Access ISA this week.
“The account pays a competitive five percent and may appeal to savers who are happy to have limited access to their funds as if more than one withdrawal is made in a year then they will receive a lower interest payment of 2.90 percent, which should be carefully considered.
However, Ms Eastell noted: “On a more positive note, the account does allow further additions.
“Once the account matures, it will automatically roll into an easy access account on September 30, 2026. Overall, the deal earns an Excellent Moneyfacts product rating.”
While Newcastle Building Society may be offering a competitive rate, it isn’t currently taking the top spot for easy access ISAs. For those who need instant access to their cash ISA, Plum is taking the top spot with an AER of 5.17 percent off a £100 deposit.
The interest rate includes a 0.86 percent bonus for 12 months. Interest is paid monthly and up to three withdrawals are permitted without facing a lower interest rate.
For those looking for more flexibility, Chip is offering an AER of 5.1 percent with unlimited withdrawals. Savers need just £1 to launch an account and interest is paid monthly.
Research from AJ Bell shows that around £750billion is held in ISA accounts across the UK, with the majority invested in stocks and shares.
The average ISA account is valued at over £30,000, but older holders typically have nearly double that amount, averaging almost £60,000. While ISAs are most common among over-65s, a significant portion of younger individuals aged 18-25 also possess an account.
Laura Suter, director of personal finance at AJ Bell, said: “ISAs turn 25 this weekend and they’ve never been more relevant, with cuts to Capital Gains Tax and Dividend Tax allowances making the humble ISA an ever more valuable way to shelter savings and investments from the taxman.”
“On top of that, the rise in interest rates has pushed far more people into using an ISA for their cash savings, with the accounts having fallen out of favour in recent years.”
Ms Suter noted that the increase in cash interest coupled with more people being pushed into a higher income tax bracket means an increasing number of people are paying tax on their cash savings, which in turn has nudged more people to use an ISA.
She continued: “Changes to the ISA rules from this weekend should make it easier for people to use ISAs and not get tripped up by the rules, which should mean people can shop around and engage with ISAs more.
“The figures highlight that almost 60 percent of the population isn’t using an ISA at the moment, where they could potentially benefit from one.
“Whether that’s people using a dealing account where they could be using an investment ISA, or people saving for children in a cash savings account where a Junior ISA might work better, or someone with old paper-based investments who could move them into an online ISA – there is clearly a gap where more people could benefit from ISA tax breaks.”
