Best Cash ISA Alternative to Santander Flexible ISA
Personal_Finance / ISA's May 01, 2010 - 02:46 AM GMTBy: Nadeem_Walayat
Santander market beating Cash ISA that pays 2.7% above the base rate for a fixed 12 months is soon to become a publicity stunt for the ISA league tables as savers will be required to jump through hoops to open an account from May 4th.
Savers may think that they have 3 days left to open an account, unfortunately that is not so as first Santander withdrew the facility to apply online leaving only branch applications as the route towards opening an account. However savers trying to open an account at Santander branches may find their progress blocked -
a. Accounts cannot be opened on the day of visit.
b. Staff refuse to make an appointment for potential customers to return the following day.
One could interpret these as delaying tactics ahead of the May 4th implementation of the requirement for potential savers to move their current accounts to Santander before they can open the Flexible Cash ISA account.
Alternative Current Cash ISA's
The ISA savings strategy remains to not to lock into a rates of more than 1 year, therefore this analysis is focused on instant access and 1 year fixed rate accounts. With RPI Inflation at 4.4% and CPI Inflation at 3.4%, even the best cash ISA's FAIL to match inflation which is a continuing sign of the double price tax payers are paying for bailing out the bankrupt banks. It should also be noted that rates have DROPPED since the start of the year, it really is a case of the banks ripping off savers, a normal market can only return when the artificial support for the banking sector is withdrawn by Britain's culpable Central Bank that continues to funnel tax payer cash onto the increasingly bloated banks balance sheets that are paying out billions in bonuses.
Nevertheless the following represents the best of a bad lot -
Best Instant Access ISA's
| Financial Institution | Interest Rate | Minimum £ | Comments |
| Barclays Golden ISA 2 | 3.1% | £1 | Includes a 1% bonus for 12 months. Can be opened online. Barclays mortgage holders can offset their mortgage balance against their ISA balance and hence boost their effective return on ISA savings. Barclays customer support in the past has proved to be near useless. Does not allow transfers in. |
| Nationwide Champion ISA | 2.8% | £1,000 | 2.8% Upto 30th June 2011 (1.35% bonus) Allows 1 withdrawal without penalty, accepts transfers in. So savers will need to move after 30th June 2011. |
| First Direct | 2.65% | £1 | Offers a fixed rate of 2.65% until October 2011. Allows transfers in so you could consolidate your many ISA accounts as they mature. Open online. |
| Newcastle BS | 2.75% | £500 | 120 day notice - Pays 1.75%, or 2.75% on whether funds are held until anniversary. Cannot be opened online. |
| Halifax Reward | 2.60% | £1000 | 2.1% is conditional on not making more than 4 withdrawals a year, Instant access, Transfer in as many ISA's as you want i.e. a good consolidator, can be opened online. After 1 year rate drops to 0.5% |
Best Current Fixed Rate ISA's (1 Year)
| Financial Institution | Interest Rate | Fixed Period | Minimum £ | Comments |
| Coventry BS | 3.25% | 1 Year | £5,100 | NO Transfers, Can apply online, Fixed until 31st May 2011. |
| Kent Reliance | 3% | 1 Year | £100 | No Transfers in, Open by Post or Branch. Fixed until 5th April 2011. |
Which ISA ?
Depends if you have a number of existing fixed rate ISA's maturing during the year i.e. therefore a consolidator may be the best option than a 1 year fix. When compared against the Santander ISA, the Coventry BS 1 year fix offers a an acceptable alternative.
Summary of ISA Rules & Benefits
- The ISA accounts are TAX FREE, and do not have to be entered onto any tax returns. The equivalent taxable return on a 3% cash ISA for standard rate tax payers is 3.6%. For higher rate tax payers it is 4.2%.
- The income from tax ISA's does not count against many mean tested benefits such as Tax Credits.
- The Allowance for 2010-11 is £10,200, £5,100 for cash and £5,100 for shares ISA's or the whole £10,200 into a shares ISA.
- You can only open ONE New cash ISA per tax year, and you can add new monies to One Cash ISA per tax year (see transfers). Similarly you can open only one new Shares ISA per tax year.
- You do not have to open a Cash ISA with your existing provider, i.e. you can open an account at different providers every year.
- Most providers allow for transfers in. And ALL should allow you to transfer out.
- Once you withdraw from a Cash ISA you cannot then then re-deposit into. The £51,00 limit refers to total deposited, and not maximum account balance. So if you deposit £5100, and withdraw £1000, then you cannot re-deposit that £1000 in the same tax year as you have used up your £5100 deposit limit.
- To maximize your tax free interest, it is best to open your account at the start of the tax year.
- The Financial Services Compensation Scheme (FSCS) guarantees the first £50,000 per person, per institution. Those with sizable savings that total more than £50,000 should ensure that their institutions really are separate, especially given the banking crisis forced mergers.
- There is the facility to transfer Cash ISA monies into Shares ISA's but NOT from Shares ISA's to Cash ISA's .
- Next years Cash ISA allowance will increase inline with inflation.
Source: http://www.marketoracle.co.uk/Article19096.html
By Nadeem Walayat
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