Your old cash Isa beats the new Super Isa

SAVERS seeking to squeeze as much tax-free interest as possible from the new Super Isa could earn more by topping up old closed accounts than from new deals, it has emerged.

A handful of older accounts shut to new savers, but still open to existing customers, pay better rates than those on offer today.

For example, older issues of the Virgin Easy Access Isa pay 1.5 pc and 1.75 pc against its current issue at 1.35 pc. That’s an extra £40 a year for every £10,000.

Previous Barclays cash Isas — including its Direct Cash Isa and Golden Isa — pay 1 . 8 pc compared with 1.49 pc at best on its Instant Cash Isa.

In these cases, customers can simply call up their provider and transfer more money in.

Other savers who already have an easy-access cash Isa taken out in previous tax years should check the rate and — if it’s decent — call their bank or building society to see if it’s possible to top up.

From next Tuesday, the amount of cash you can save tax-free is set to almost treble, to £15,000 from the current £5,940.

July 1 will see the launch of the super-charged tax-free accounts — dubbed the Super Isa or New Isa — unveiled by the Chancellor in this year’s Budget.

You can increase your return by 25 pc as a basic-rate taxpayer and by a huge 60 pc as a higher- rate payer simply by transferring your savings from taxable accounts. Move the extra £9,060 allowance into an account paying 1.5 pc and boost your income by £108 a year by saving the tax you would otherwise pay.

This bonus could grow as rates finally begin to show signs of rising. Last week, the Bank of England gave its strongest signal yet that interest rates will rise sooner than later. This rate has been frozen at 0.5 pc for more than five years.

If you are waiting to put your full £15,000 into a cash Isa from July 1, the best one- year, fixedrate deal comes from Tesco Bank at 1.65 pc — or £247 interest for the year.

Virgin Money’s new deal, launched last week, pays 2.1 pc for two years or £315 a year. You can transfer your existing cash Isas into these accounts.

On easy-access accounts you can earn 1.5 pc with Nationwide’s Instant Isa Saver and National Savings & Investment’s Direct Isa, or 1.6 pc with Cheshire and Derbyshire BS’s Easy Isa. The Nationwide account accepts transfers, but NS&I, Cheshire and Derbyshire don’t. If you have already opened a cash Isa this tax year — which started on April 6 — then you can t op i t up with a further £9,060.

With an easy-access account there’s no problem since you can add to it during the year to use up your full allowance.

But if you had a fixed-rate deal, you have a limited window to add to your account.

Miss this and you will lose your increased cash Isa allowance for this tax year with most providers. This is because HM Revenue & Customs stipulates you can open only one cash Isa in a tax year. With Halifax you have 180 days from opening your account to top it up.

Other providers are less lenient. For example, Yorkshire, Skipt on and Leeds building societies only give you July to act. With Santander’s two-year deal, you have until August 31. Nationwide’s customers can top up at any time or open a new one.

Unusually, the building society has organised its cash Isas so that however many you open in a tax year, it counts only as one in HMRC’s eyes.

Lloyds gives you until the end of the tax year to top up.

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