Investments  

Skipton ups rates on Isas and bonds

Skipton Building Society has upped rates on its one- and two-year fixed-rate Isa and bonds.

One-year fixed rate Isas are now available at 1.5 per cent, while the rate for the two-year deal is 1.8 per cent.

In addition, Skipton has also increased the rate of interest applicable to its bonds fixed over a one-year period to 1.5 per cent, and 1.8 per cent fixed over two years.

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The rates for the three- and five-year fixed-rate Isas and bonds remain the same, at 2 per cent and 2.2 per cent respectively.

The minimum investment for each account is £500, up to a maximum of £1m (or £2m for joint accounts).

Customers can deposit the annual Isa limit of £15,240 into Skipton’s fixed-rate Isas and are also able to transfer in previous years’ Isa allowances.

Last month, the provider launched a new ‘Legacy Isa’, paying 1.5 per cent interest.

This follows the implementation of legislation, initially announced in the Autumn statement, which allows surviving spouses to inherit their deceased partners’ Isas without losing their tax-free status or affecting their own Isa limits.

Provider view

Kris Brewster, head of products at Skipton, said: “We are pleased to offer increased rates for those looking to invest over the short term, while our three-year rate continues to offer 2.00 per cent. Our bonds and e-bonds allow customers to save up to £1m, and our fixed-rate Isas continue to offer savers attractive rates despite the low-rate environment.”

Adviser view:

Commenting on the Isa products, John Ditchfield, director at Barchester Green Investment, based in London said: “Given that the rates are considerably above the rate of inflation – which is currently at 0.1 per cent according to the Office of National Statistics – I think the 1.5 per cent rate for the one-year fix and 1.8 per cent for the two-year fix are very reasonable.”

“I think that the rates that are being offered on cash Isas at the moment are reasonable for the protection they offer to investors.

“The traditional argument in favour of stocks and shares Isa investments is they should outperform over the medium to long term. This has been the case in the past.”

Charges

The minimum investment for each account is £500.

Verdict

Cash Isas have received negative press in recent times. The rate of interest offered by providers is currently disappointing, thanks to the continuation of record low base rates. Security is probably the biggest plus point when it comes to cash Isas – although it exposes them to inflation risk which can erode the purchasing power of their savings.

Alas, interest rates should rise soon. Many industry experts have revised their initial prediction on when the rise will occur from the last quarter of this year to Spring 2016. Once the Bank of England decides that it is the opportune time to hike rates, providers will undoubtedly follow suit and increase their rates for cash Isas also.