Written by Karen Bryan
Update 25 January 2013 – The current Santander Direct ISA (Issue 13) is paying 1.75%.
Update 10 August 2012 – the Santander Direct ISA Issue 10 is paying 3.0%, a 12 month variable bonus of 2.5% and a variable underlying rate of 0.5%.
The new UK tax year started on 6 April 2012 and I immediately added this year’s allowance of £5,640 to my existing Cash ISA. However as my current Cash ISA, a Halifax ISA Online Saver, is paying 3% in interest (2.75% fixed for 12 months + 0.25% variable), I am searching for an account with a higher rate of interest. This account should also allow penalty free withdrawals, so I can have the option to move the money to a better account if interest rates do start to go up.
The Santander Direct ISA Issue 9 paying 3.3% (9 April 2012) looks good, but I don’t like the fact that both the 12 month bonus of 2.8% and the underlying interest rate of 0.5% are variable. This leaves me wondering if the rate may drop during the 12 month bonus period and then I’ll have to shunt the money around again. The minimum opening deposit is £2,500.
I’ve had a couple of Santander eSaver accounts with 12 month variable rate bonuses which hadn’t been reduced during the bonus term. However, that doesn’t mean it won’t happen with the Santander Direct ISA Issue 9.
I was initially tempted by the NatWest e-ISA offering 3.5% if you put in at least £30,000, made up of a variable underlying rate of 2.5% plus a one year variable rate bonus of 1%. However on closer inspection, I realised that the bonus wasn’t paid straight away.
It’s not good when your savings are losing value. Athough the UK rate of inflation is supposedly dropping, with CPI at 3.4% and RPI at 3.7%, I’d have to tie my Cash ISA up for 2 years to get an interest rate of 4% to achieve a real return.