Bank relaunches market leading best buy 4.8% ‘double access’ cash ISA ahead of Christmas
A PROMINENT online bank has relaunched a best buy 4.8% cash ISA ahead of Christmas.
Paragon Bank has relaunched its popular “double access” cash ISA – but for a limited time only.
Individual savings accounts (ISAs) allow you to save up to £20,000 a year tax-free.
In contrast, with a regular savings account, basic rate taxpayers are required to pay tax on their savings if they earn more than £1,000 in interest annually.
Higher-rate taxpayers must pay tax on savings as soon as they earn more than £500 in interest annually.
This is known as the personal savings allowance, which was first introduced in 2016.
However, you are exempt from this allowance when your money is saved in an ISA.
Of course you won’t pay tax on any interest earned below these thresholds.
However, saving into an ISA can be particularly beneficial for those with substantial deposits, such as individuals saving to purchase a home.
With Paragon’s Double Access ISA, customers can two withdrawals every 12 months without impacting the 4.8% interest rate.
Therefore, if you made fewer than three withdrawals in a year and deposited approximately £10,000, you could expect to earn up to £480 in interest after 12 months.
However, if three or more withdrawals are made, the interest rate drops to 1.25%.
To sign up for the account customers need to deposit a minimum of £1,000.
To find out more visit paragonbank.co.uk/savings/cash-isas/double-access-cash-isa.
In recent years, digital banks and building societies have been offering better savings rates than big high street names like HSBC and Barclays.
FINDING THE BEST SAVINGS RATES
WITH your current savings rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity.
Research price comparison websites such as Compare the Market, Go Compare and MoneySupermarket.
These will help you save you time and show you the best rates available.
They also let you tailor your searches to an account type that suits you.
As a benchmark, you’ll want to consider any account that currently pays more interest than the current level of inflation – 2%.
It’s always wise to have some money stashed inside an easy-access savings account to ensure you have quick access to cash to deal with any emergencies like a boiler repair, for example.
If you’re saving for a long-term goal, then consider locking some of your savings inside a fixed bond, as these usually come with the highest savings rates.
How does it compare?
The Paragon ISA is a market leader for those who wish to hold their cash in a bank regulated by the FCA and prefer to manage their account online.
It’s also a great option for those who may need to make one or two withdrawals without facing a panlty.
This account is considered an easy-access cash ISA, meaning you can make a limited number of withdrawals without a penalty.
However, the interest rates on these accounts can change with little notice, meaning you might not always receive the rate initially promised.
In contrast, fixed cash ISAs generally do not allow withdrawals but offer fixed interest rates for terms ranging from one to five years.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Paragon Bank’s new Double Access Cash ISA has taken a prominent place in the top rate tables this week and may be an attractive option for investors who prefer to open and manage their savings accounts online.
“The deal pays a competitive rate of 4.8% on its anniversary, but in the current market it can be beaten.”
For instance, Plum’s easy-access cash ISA offers returns of up to 5.18%.
However, you can only open and manage this account with a smartphone.
The same goes for MoneyBox’s cash ISA, which offers savers 5.17%.
Trading212 is offering a 4.9% easy-access cash ISA which can be managed online and via an app.
But like with other e-money firms, Trading212 deposits your savings into a ‘client money account’ with Barclays, Chase, NatWest or Ulster Bank.
This means that if you already have existing savings with one of these banks, any savings in the Trading212 ISA will be included within your FSCS protection allowance – up to £85,000.
Therefore, if your savings were to exceed this limit, they could be at risk if your bank were to go bankrupt.
However, unlike Paragon’s accounts, these accounts allow unlimited withdrawals without an interest penalty.
Is an ISA right for you?
ISAs offer tax-free interest, unlike regular savings accounts.
Since the interest rates are very close, an ISA is generally better if you’re a higher earner, as regular savings interest may be taxed above your allowance.
If you’re a higher-rate taxpayer (earning over £50,271), your personal savings allowance (PSA) is only £500.
With interest rates as they are, you could easily exceed this allowance with a relatively modest sum saved.
However, if you’re a basic-rate taxpayer with limited savings, a normal account might be slightly better due to the marginally higher rate, as long as the interest doesn’t exceed the £1,000 a year allowance.
The Financial Conduct Authority (FCA) has a useful calculator which you can use to understand if you’ll breach your own personal savings allowance.
Find out more by visiting fca.org.uk/consumers/savings-calculator.
WHAT’S NEXT FOR SAVINGS RATES?
Savings rates usually rise and fall with the Bank of England’s base rate.
This was cut for the second time in four years from 5% to 4.75% last month.
The next interest rate announcement is on Thursday December, 19.
If interest rates continue to fall it spells bad news for savers, whose rates typically fall when the Bank’s rate is cut.
SAVINGS ACCOUNT TYPES
THERE are four types of savings accounts fixed, notice, easy access, and regular savers.
Separately, there are ISAs or individual savings accounts which allow individuals to save up to £20,000 a year tax-free.
But we’ve rounded up the main types of conventional savings accounts below.
FIXED-RATE
A fixed-rate savings account or fixed-rate bond offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw, but it comes with a hefty fee.
NOTICE
Notice accounts offer slightly lower rates in exchange for more flexibility when accessing your cash.
These accounts don’t lock your cash away for as long as a typical fixed bond account.
You’ll need to give advance notice to your bank – up to 180 days in some cases – before you can make a withdrawal or you’ll lose the interest.
EASY-ACCESS
An easy-access account does what it says on the tin and usually allows unlimited cash withdrawals.
These accounts tend to offer lower returns, but they are a good option if you want the freedom to move your money without being charged a penalty fee.
REGULAR SAVER
These accounts pay some of the best returns as long as you pay in a set amount each month.
You’ll usually need to hold a current account with providers to access the best rates.
However, if you have a lot of money to save, these accounts often come with monthly deposit limits.