Savers’ pain as Isas slump to a new low

SAVERS are reeling once more as rates on cash Isas slump to a new record low just as the taxfree savings season begins in earnest.

Millions of savers poured money into cash Isas in their heyday, looking to mop up their allowance before the annual April 5 deadline.

Last year the late rush into cash Isas failed to materialise despite the increased £20,000 tax-free allowance, as highstreet banks offered dismal rates with NatWest paying 0.01 per cent, the lowest ever.

Damien Fahy, founder of personal finance site MoneyToTheMasses.com, said take-up may be low this year as cash Isas suffer a slow death: “The only thing that will bring them back to life is higher interest rates.” CASHING OUT The average cash Isa paid an all-time low rate of just 0.93 per cent over the past year, figures from MoneyFacts.co.uk show. Average rates did creep up slightly in January to 1.09 per cent, helped by November’s base rate hike, but that is lower than two years ago.

With yesterday’s figures showing consumer price inflation at 3 per cent, savers are losing money in real terms both on cash Isas and standard savings accounts.

Rachel Springall, finance expert at MoneyFacts, said: “Your savings will continue to be eaten away by inflation, as not a single savings account matches 3 per cent.”

Isas have also been undermined by the personal savings allowance, launched in April 2016, which allows basic rate taxpayers to earn up to £1,000 savings interest tax-free outside an Isa, while higherrate taxpayers can earn £500.

Springall said this has reduced the attraction of cash Isas, as the best standard accounts often pay more: “For instance, the AA offers today’s best easy access Isa at 1.16 per cent, but RCI Bank pays 1.30 per cent on a standard easy access account.”

Fahy said cash Isas still work for higher and additional rate taxpayers: “Those with larger balances could exceed their personal savings allowance, especially when interest rates finally start to rise.” NEAR ZERO Savers are being urged once again to shop around for a better rate as separate figures show one in five accounts now pays a derisory 0.10 per cent.

Anna Bowes, director at independent savings website SavingsChampion.co.uk, said: “These rates are pathetic and any saver who is sticking with a bank that is paying them so little should vote with their feet.”

Somebody with £10,000 to deposit now has the choice of getting £10 a year or £130 a year from RCI Bank. She added: “I know which most people would want.”

However, Bowes also said there are signs of hope as best-buy rates start to creep up on both standard savings accounts and cash Isas. BIT OF TROUBLE By contrast, savers who have taken a punt on the stock market have been rewarded over the last year, with the average stocks and shares Isa returning 11.75 per cent.

Guy Stephens, technical investment director at wealth advisers Rowan Dartington, said investors should only put money in today’s sky-high market if they can leave it there for the long term. “Arguably, the longer the bull market runs, the more savage the shock when it ends.”

Savers who took a punt on cryptocurrencies such as Bitcoin are reeling as the price plunged below $12,000 yesterday.

The cryptocurrency has crashed more than 40 per cent after peaking at $20,000 before Christmas, hitting those who jumped in late.