InvestmentsJul 9 2014

Leeds revamps Isas to exploit allowance increase

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The society said it had chosen 1 July, when the allowance is increased, to launch a range of fixed-rate cash Isas, as well as its new Isa Builder.

The Isa Builder offers a return of 2 per cent a year AER, maturing on 5 April 2015.

The one-year fixed-rate cash Isa pays 1.5 per cent AER and matures on 31 August 2015. The two-year, fixed-rate cash Isa pays 2 per cent AER and matures on 31 August 2016.

The three-year fixed-rate Cash Isa pays 2.20 per cent AER and matures on 31 August 2017. Leeds’ five-year fixed-rate cash Isa pays 2.85 per cent AER, maturing on 31 August 2019.

The Isa Builder can be opened with a minimum of £100 and has a £1,500 cap on monthly balance increases. A total of up to £1,500 can be invested by the end of July, a total of £3,000 by the end of August, and so on, up to this year’s increased allowance limit.

“We wanted to offer savers a flexible way of building up their investment and making the most of the increased Cash Isa allowance,” said Kim Rebecchi, sales and marketing director at Leeds Building Society.

“Isa Builder is intended to encourage regular saving, but it does not penalise people if they want to miss a month or two; for example, not making a deposit in December when Christmas spending might take priority.

“If savers are fortunate enough to be able to save £1,500 each month, they will receive the maximum benefit tax-free. However, anyone wanting to add smaller amounts can make as many deposits as they like each month, as long as they do not exceed the overall cap.” Transfers of previous years’ Isa subscriptions are not all-owed. All withdrawals, closure or transfers are subject to 60 days’ loss of interest on the amount withdrawn/transferred.

All accounts are available to open in branch, by post or online, and can operated by post and branch.

REACTIONS

PROVIDER VIEW

Kim Rebecchi (below), sales and marketing director at Leeds Building Society, said: “Before March’s Budget we had called for an increase in the tax-free savings allowance and hope the change will provide an extra incentive to encourage more people to start and keep the savings habit. We’re also taking the opportunity to re-launch our range of Fixed Rate Cash Isas, to let savers choose the type of product that best suits their needs, all with competitive returns.”

ADVISER VIEW

John Ditchfield, a director at Barchester Green Investment in London said: “For some investors cash Isas provide a certainty, but that certainty has to be weighed up with the reality that inflation is at a record low. These rates are only slightly higher. These are suitable if investors are prepared to see a real reduction in the value of the cash they invest over time, but have the certainty of that return.”

CHARGES

There are no charges for using this product, but any withdrawals, closures or transfers made are subject to loss of interest, depending on the fixed rate period and the amount withdrawn or transferred.

VERDICT

With the increase in the personal allowance, it makes sense to launch an Isa that encourages regular saving to maximise the amount people can put away tax free.

However, the rates being offered are not particularly great, so investors might be better using these as their portfolio’s cash holding and nothing more.