The Leeds Building Society has offered savers a beacon of hope by launching a new inflation-busting cash ISA.
The society’s new five year fixed-rate bond and five year cash ISA products both offer 3%. What’s the difference? See our guide on fixed-rate bonds vs. cash ISAs.
ISAs are among the products that have suffered the most since the launch of the Funding for Lending Scheme a year ago, according to recent Bank of England figures.
The average ISA (without an introductory bonus) currently offers just 0.61%, which represents a huge 57% fall from the average rate twelve months ago (read more).
Leeds’ new 3% ISA enters the market far above the previous table-topping products in this sector. The five-year product also allows the inbound transfer of existing ISA funds, which is a bonus for savers who are looking for a suitable home for their nest-egg that is capable of keeping up with the rising cost of living.
Leeds Building Society has launched new five-year market-leading accounts offering 3%.
The launch follows the announcement by First Direct that the top rate on its cash ISA – the sole tax-free inflation-beating option in recent months – would be cut by a whole percentage point in November.
And with the Bank of England suggesting that interest rates are unlikely to rise for another three years, there appears to be less for savers to lose by locking their old ISA funds into the Leeds account, despite frequent warnings by experts not to fix for long periods.
In fact, Leeds has addressed these concerns by offering savers some flexibility for just a small sacrifice in interest.
A separate version of the two products, each returning 2.75%, allows a customer to withdraw up to a quarter of their funds at any time during the product lifespan.
Another plus is that the ISA allows inbound transfers without limit. The downside, however, is that it does not allow additions in subsequent years.
Nevertheless, simply owning this ISA does not stop savers investing into a different ISA in forthcoming tax years. (See our guide to Transferring Cash ISAs for more details.)
Kim Rebecchi, the sales and marketing director at Leeds Building Society, said the launch had been timed to coincide with the large volume of deposits in fixed-rate products that were due to mature this autumn.
"Whilst the traditional ISA season is in March and April each year, around the tax-year end, our research showed us that circa £7.4 billion of fixed rate ISA balances mature in Q4 2013," she said.
"It also highlighted that a further £26.7 billion of non-ISA bonds are maturing during the same period, which means that many savers will now be looking to maximise their returns.
"That is why we have launched these market leading products paying 3%, and 2.75% for those who require the peace of mind of access to some of their funds without notice or penalty."
Keith McDonald
Which4U Editor
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