Savers continue to be hit hard by falling rates, as another round of cuts to cash ISAs leaves hard-pressed consumers even deeper in the quagmire.
Cuts to savings products at Virgin Money, the Cheshire Building Society, and its parent institution, the Nationwide, present a further blow for savers attempting to keep pace with inflation.
The Cheshire’s easy-access ISA has been slashed from 2.3% to 1.7%. The Virgin Money cash ISA rate tumbles from 2.15% to just 1.75%, though it remains among the best products available for those seeking to transfer their ISAs.
(See our guide to transferring cash ISAs.)
Nationwide’s Web ISA has crashed to just 1.50%, though the society maintains its Flexclusive ISA for current account holders, at 2.25%.
The Value of ISAs
Cash ISAs, which allow savers to save £5,760 tax-free during the current tax year, are among the most efficient form of savings.
With standard savings accounts, basic rate taxpayers currently need a return of almost 3.4% to beat the current rate of inflation. The best available easy-access account on the market (NS&I) currently offers just over half that amount.
While five-year fixed-rate bonds currently stand at 2.90% (FirstSave / Shawbrook), savers will have to lock away their funds until 2018 and will only receive 2.3% after tax.
As it stands, the First Direct cash ISA does beat inflation, at 3%, but savers will need a hefty £40,000 to achieve this rate.
Virgin Money’s five-year fixed-rate ISA is also a stand-out product in the current market, at 2.75%, but savers won’t see their funds until 2018.
The collapse in savings accounts is largely attributed to the government’s Funding for Lending Scheme, which has provided a cheap source of funds for institutions and reduced their need to offer competitive deals on retail deposits.
Keith McDonald
Which4U Editor
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