Leeds Building Society has made changes to its fixed rate Isas.
These products are: one-year fixed rate Isa paying 1.20 per cent tax-free pa/AER and a two-year fixed rate Isa paying 1.40 per cent tax-free pa/AER.
The building society said most savers benefited from the personal savings allowance (PSA), but it stressed that Isas were still relevant as a way to shield your savings from the taxman in the longer term.
Separate from Isas, the introduction of the Personal Savings Allowance on 6 April 2016 means basic rate taxpayers can earn up to £1,000 in savings tax-free.
Higher-rate taxpayers can earn up to £500.
Both Leeds products require a minimum £100 investment. The maximum investment is £20,000 in 2017/18, plus previous years’ Isa subscriptions, while interest is calculated daily and paid on maturity, on 31 October 2018.
Interest can be added to the account, transferred or paid to another account with LBS.
On the day after maturity(1 November 2018), funds, including interest, will be transferred to an instant access Isa maturity account
Withdrawals and transfers are allowed, but will be subject to 60 days’ loss of interest or an equivalent withdrawn or transferred.
Research from Moneyfacts shows that those who choose a cash Isa over a fixed rate bond miss out on the best rates.
Over time, the gap between the returns on Isas and bonds has widened, the study found.
In 2015, before the PSA was introduced, savers could get an average two-year fixed Isa rate of 1.69 per cent, but today this has dropped to 1.08 per cent.
In contrast, the average two-year fixed rate bond paid 1.8 per cent in 2015, but now pays 1.37 per cent.
Provider view:
Richard Fearon, Leeds Building Society chief commercial officer, said: “Anyone who has been saving into tax-free accounts since they were launched could have built up quite a significant nest egg by now.
“All our Isas allow transfers in of previous years’ subscriptions, so this maximises the benefit of keeping the returns tax-free.
“Our latest fixed rate Isas are among the best on the high street and part of our wider tax-free savings range, which offers a choice of fixed terms and easy access products.”
Adviser view:
Scott Gallacher (pictured), director at Rowley Turton private wealth management, said: “While competitive, the two new fixed rate cash Isas from the Leeds Building Society can be bettered.
“Charter Savings Bank offers fixed rates of 1.31 per cent for a one-year term and 1.52 per cent for a two-year term online.
“If you don’t need the Isa benefit and are happy to bank via your mobile phone, Atom Bank is offering 1.9 per cent for one year and 2.1 per cent for two years.”
Charges:
Not applicable.
Verdict:
With the introduction of the personal savings allowance, firms have had to become more competitive with their Isas. Therefore, there is a lot of choice out there for customers.
