InvestmentsOct 9 2014

Lloyds boosts returns for Isas and savers

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From the beginning of this month Lloyds Bank increased rates on its cash Isa as well as tracker and fixed-rate bond savings accounts.

The two-year fixed rate cash Isa rate has been increased by 0.20 of a percentage point to 1.70 per cent on balances below £20,000 and increased by 0.05 of a percentage point to 1.75 per cent on balances of £20,000 and above.

The Lloyds 18-month tracker bond rate has been increased by 0.20 of a percentage point to 1.50 per cent on balances from £2,000 and below £50,000, and 1.55 per cent on a balance of £50,000 and above.

On its one-year fixed bond and online fixed bond Lloyds has increased the rate by 0.20 of a percentage point to 1.45 per cent on balances from £2,000 and below £50,000, and 1.50 per cent on balances of £50,000 and above.

On its two-year fixed bond and online fixed bond Lloyds has increased the rate by 0.20 of a percentage point to 1.70 per cent on balances from £2,000 and below £50,000, and 1.75 per cent on balances of £50,000 and above.

The increase comes as the number of people investing in Isas appeared to fall. The number of people saving into the tax-free accounts fell 15 per cent at the end of August compared with a year earlier.

Approximately £9.3bn was deposited into cash Isas between January and August this year, compared with £11bn invested during the same period last year, according to the British Bankers’ Association. This is despite the introduction of the super Isa in July, giving savers an increased £15,000 allowance for cash Isas.

Reactions

Provider view:

Philip Robinson, savings director at Lloyds Bank said: “These rate increases will catch the eye of those people looking for higher returns on their savings by locking away their cash.

“Our fixed savings range gives our customers plenty of options so that they can save over a time period that is most suitable for them.”

Adviser view:

Daren O’Brien, an independent financial adviser at London-based Aurora Financial Solutions said: “This is good news for savers, and the increases are fairly substantial in some cases. I would like to see more Isa providers offer a higher rate for those savers with large amounts to invest, such as those who have built up a large Isa pot.

“I imagine it might be Lloyds are chasing customers as a result of the Isa changes to cash savings accounts and the apparent move away from Isa saving.

“That or Lloyds might also know something we don’t about the interest rate. But in general this is a good move.”

Verdict

For savers looking around for a good Isa deal, rate rises must be something of a holy grail. However, once one provider raises rates it is likely that others will follow. So it may be worth savers holding fire. The time period the rate is paid on the savings accounts is also reasonable because while Lloyds require the saver to lock away their money there is an option of 18 months or up to two years.

This could help those looking to eke out the interest paid on money being saved towards a deposit for a house.

Encouraging more speculative savers to flock back to Isas may require a few more rate rises, however.