Leeds Building Society has raised the interest rate on its one-year fixed rate Isa to 1.05 per cent. There is also penalty-free access to a quarter of the savings during the one-year term.
There is a minimum investment of £100, with a maximum investment of £20,000 in 2017/18. The fixed end date is 1 July 2018 when the account reverts to a variable rate instant access Isa account.
Further withdrawals above the allowed 25 per cent will lead to a loss of 60 days' interest, while deposits for this year can be made up to and including 30 June 2017.
The new product follows the recent launch of a new issue of its online access account, which also pays balances of 1.05 per cent on balances of between £10,000 and £250,000 permitting withdrawals without notice or penalty. This account pays interest on 31 May 2018 and is operated online-only.
For the Isa, interest can be added to the account, transferred or paid to another account with the society.
The building society confirmed that with the personal savings allowance introduced in April 2016, basic-rate taxpayers can earn up to £1,000 in savings income tax-free. Higher-rate taxpayers can earn up to £500.
Provider view
Richard Fearon, chief commercial officer at Leeds Building Society, said: "As well as increasing the return on the one-year fixed rate Isa, we've also included unique penalty-free access to up to 25 per cent of the investment.
"Even with a shorter-term fixed rate account, we know that savers sometimes need urgent or unexpected access to their next egg before the end of the term, so this feature is an added benefit of the new Isa."
Adviser view
Andrew Vanroy, relationship adviser at Savings Champion, said: "This is number five on our Best Buy tables. They're not offering the best rate or interest for that type of account. Bank of Cyprus is offering 1.13 per cent, so that would be the main difference. But there's a different type of access. You can access the Leeds product via branch and phone, whereas Bank of Cyprus is post, online, branch and phone.
"Leeds Building Society allows withdrawals up to 25 per cent without notice or loss of interest, whereas bank of Cyprus is access on closure only – there's no access within that time.
Charges: Withdrawals over 25 per cent are subject to a loss of 60 days’ interest.
Verdict
Given that base rates are at historic lows of 0.25 per cent, it is amazing to be getting any kind of return at all much above Bank of England base rate. The 1.05 per cent is not a bad rate considering, although it is not the best in the market, with other banks offering a few basis points above this level.
However, there are other benefits that come with the marginally lower rate, which is much more flexibility with one's cash. Theoretically, one can take out the entire balance without much penalty and up to 25 per cent of the account value without penalty at all. The marginally higher rate from bank of Cyprus comes with no flexibility on its one-year account, so in determining the correct product for one's client, an adviser has to take a view in terms of the client's set of priorities.
