Do you know what interest rate you are getting on your ISA?
If not, you could be losing up to £1,300 every year in interest, according to new research. The study found that ISA providers often reduce interest rates on older ISAs whilst offering attractive deals to new ISA customers. And, this discrepancy in rates is costing savers hundreds of pounds in interest.
The Daily Telegraph is urging consumers to shop around for the best ISA transfer deals to avoid losing valuable interest.
ISA savers potentially losing out
The research from Moneyfacts found that those who have invested the maximum into an ISA each year will have total savings exceeding £50,000 – and this is before any interest payments have been added.
Michelle Slade of Moneyfacts said: “Many people are sitting on sizeable savings if they have taken out ISAs over the past decade. So while it makes sense to check you’re getting the best rate you can on any new Isa, the priority should be to make sure your existing Isa savings are still earning a fair rate.”
Disappointing returns on existing ISAs
According to Moneyfacts, the average return paid on a cash ISA is 1.71 per cent. However, the Daily Telegraph reports that ‘this average disguises the fact that many ISAs – including some offered by Halifax, Santander, Barclays and Nationwide – pay just 0.1 per cent.’
The newspaper suggests switching into a better paying ISA. It identifies the Bank of Cyprus as a good option – currently paying 3.1 per cent on its one-year ISA deal – while both Principality Building Society and Halifax offer easy access ISAs paying 2.8 per cent. Northern Rock has a five year fixed rate ISA that pays 4.3 per cent.
Ms Slade added: “This difference in interest rates can add up to a significant sum if you are sitting on ISAs worth £50,000. On this amount, those who opt to take out this Northern Rock account would earn an extra £1,332 a year compared with the average ISA deal, and those with the Bank of Cyprus deal would earn an additional £700.”
