New research has shown that savers are heading for “perhaps the worst ISA season on record.”
Savers are now well used to poor interest rates on their deposit accounts and Cash ISAs (Individual Savings Accounts), however a new factor seem to be making things worse.
As we head to the end of the tax-year and into what is traditionally known as ‘ISA season’, savers would usually expect to see interest rates on Cash ISAs tick upwards, as banks and building societies compete for savers cash.
Not this year.
Research from Moneyfacts has found that the best rate currently available on an Instant Access Cash ISA is 1.41%, down massively on five-years ago when savers could have received over3%.
Why are Cash ISA deals so poor?
Clearly we are still in a low interest rate environment, something which shows no sign of changing.
However, there is an additional factor to add this year, the introduction of the new Personal Savings Allowance.
From 6th April 2016 all basic rate taxpayers will be able to earn up to £1,000 in interest each year, tax-free. This figure drops to £500 for higher rate taxpayers.
As a result, it is clear than banks and building societies believe that few savers will use Cash ISAs in the future and that they therefore don’t need to offer such attractive rates.
Only time will tell whether this trend continues and savers shun Cash ISAs for traditional savings accounts. One thing is certain though, interest rates on both Cash ISAs and other savings accounts are set to remain in the doldrums for some time to come.
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