The day prior to their launch, True Potential warned saving pots would actually suffer a read reduction in value if savers used their Nisa allowance to invest in cash alone.
Out of those intending to use a Nisa, 44 per cent of 2,000 people polled by True Potential said they would invest in cash only and just one in 10 are planning to invest the maximum £15,000.
Daniel Harrison, senior partner at True Potential, said: “If savers use their Nisa allowance to invest in cash alone, their savings will, in almost all cases, reduce in value due to the poor interest rates offered by high street banks.”
Kris Brewster, head of products at Skipton Building Society, says the rates offered on new Isas are dependent on the provider offering them and also the type of product chosen. The highest rates currently available are for longer-term fixed rate accounts, typically for terms of five years, he says.
He points out longer-term fixed rate Isas require the investor to lock away their funds for that period of time. Variable rates offer access to funds but Mr Brewster says these generally have lower rates.
For those wanting instant access to their savings, Peter Rogerson, savings and mortgages director of Virgin Money, says New Isa accounts pay around 1.5 per cent.
For people who are prepared to commit their money for a set term, Mr Rogerson says fixed rate Isas currently offer around 1.75 per cent for one year, 2.05 per cent for two years, 2.25 per cent for three years and up to 3 per cent for five years.
Mr Rogerson says: “Stocks and shares Nisas offer the potential for higher returns, but also come with higher risk as they do not protect capital in the way cash Nisas do.
“There are a wide selection of stocks and shares Nisas available, some have up front fees and all have ongoing charges, so it is important that customers read the product literature prior to opening an account to understand what charges will apply.”
Choosing the right account from the outset is just part of making sure you’re getting the best returns for your needs, says Anna Bowes, financial adviser and director of London-based Savings Champion.
Several websites, including the Savings Champion site itself, present best buy tables that cover the whole market.
Ms Bowes says: “Keeping a close eye on your account and transferring when the rate becomes uncompetitive is just as important.
“Variable rates change and fixed rates mature, so rates can plummet to uncompetitive levels and therefore doing nothing can cost you dearly. Therefore, it is vital that you track your account and move your money regularly to keep you on the best rates.
“Best buy rates rarely stay best buy over the longer term.”
Virgin Money’s Mr Rogerson says: “Shopping around is the key to getting the right Nisa. Price comparison websites are updated daily, providing an almost live view of what the best rates available are.
“When looking at the different accounts available, it is important to look at the product details.
“Some products are only available to certain people (they may require a current account to be opened with the Nisa provider, for example), some accounts include introductory bonuses that inflate the interest rate for a short period and some may have restrictions on the number of charge-free withdrawals permitted.”
