The new super-sized pounds 15,000 Isas will be with us in just 10 days. But will the shake-up trigger a rise in interest rates from their current derisory levels?
The omens are not looking good. Several providers have cut their rates in the run-up to the launch on 1 July. From that date, Isas will be transformed into a simpler product known as the "New Isa", or "
Savers will be allowed to deposit up to pounds 15,000 a year in cash accounts, or invest the same amount in stocks and shares, or any combination of the two. So for a couple, that's a whopping pounds 30,000 a year they can shelter from the taxman.
But Sylvia Waycot at website Moneyfacts.co.uk says that while it is great that people will be able to put more money into the tax-free accounts, "the euphoria will be short-lived if they pay so little interest that the taxman hardly notices".
According to the site, the average cash Isa interest rate is just 1.58%. A year ago it was 1.74%. It's not only Isas - today the average standard easy-access savings account pays just 0.63%, down from 0.71% last year, and fixed-rate savings bonds have also taken a hammering.
Isa providers that have reduced rates since the start of this month include Santander, which is now offering 2% on its "123" two-year fixed rate Isa, available to 123 current account and credit card customers. Prior to 9 June it was paying 2.3%.
Santander's standard two-year fixed product now pays 1.5%, down from 2% before. Another account that has taken a hack is Ecology building society's Foundations Cash Isa, whose rate was cut from 2% to 1.5% on Monday.
NatWest and its parent bank
Meanwhile, it was claimed this week that there is an urgent need for greater awareness about the new regime. One third of those quizzed in a survey by financial services firm True Potential had never heard of New Isas/Nisas, while just 16% felt the new, more generous accounts will make them more likely to save.
Some providers have been pro-active. During the last few days
Meanwhile, there was a bit of good news for savers this week when it emerged that inflation, as measured by the consumer prices index, fell more than expected in May - to 1.5%, down from 1.8% in April.
So how will the new Isa regime work? From 1 July, all Isas will become Nisas - this applies to existing accounts as well as those opened after 1 July. Between 6 April and close of play on 30 June, the total amount you can pay into a cash Isa is pounds 5,940.
If you also have a stocks and shares Isa, you will be able to pay into that account, but the combined amount must not be more than pounds 11,880.
When your account becomes a
There are a few semi-decent Isa rates still on offer, including:
* A five-year fixed-rate from
* A five-year fixed rate from
* An instant-access Isa paying 2% that is only available inside
* An 18-month fixed-rate Isa from the
Euphoria will be short-lived if the new Isas pay so little
interest the taxman hardly notices
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