- FCA estimates savers are £4 billion a year better off thanks to improved easy access rates (Source: FCA update on cash savings market)
- But the biggest banks pay below average rates on easy access cash products
- Savers urged to shop around for the best rates as interest rates fall and savings rates are pared back
- Comparison sites may not pick up the best rates on cash savings, with investment providers including AJ Bell’s Dodl app offering the leading rates on cash held in an ISA
Charlene Young, pensions and savings expert at AJ Bell, comments:
“As the Bank of England base rate comes down savers should be alert to falling rates of interest on cash, and be prepared to switch to find a better deal. While news that easy access rates improved slightly in response to pressure from the City regulator is welcome, it is still crucial to shop around to get the best deals.
“Banks tend to be quick to pass on base rate changes when it suits them – higher mortgage rates kicked in swiftly as base rate increased, and savings rates are quickly being cut as base rate comes down. As a result, there are now no easy access cash ISA rates offering above 5% interest*.
“However, savers would do well to search around for the best places to park their cash savings and may find that comparison sites miss the best deals. Several investment providers, including AJ Bell’s own Dodl ISA, pay 5% or more on cash**. This gives savers an attractive rate of interest, as well as the option to invest some of that cash as well if they choose. That means you can have the best of both worlds, with the flexibility to hold cash and investments in the same ISA.
“Unfortunately, the arcane structure of the UK’s ISA system means that comparison services often only look at cash ISA interest rates. A simplified ISA system, where providers could offer both cash savings and investment products within a single ISA tax wrapper, would alleviate this problem and break down the barriers between cash savings and investing.
“For those holding cash outside an ISA, using a savings platform can make it far easier to search for the best deals. The AJ Bell Cash Savings Hub offers deals from a range of banks within a single hub, with rates of 5% available to savers.”
*Source: Moneyfactscompare.co.uk
**5.09% AER variable on cash held in an ISA or Lifetime ISA with AJ Bell Dodl
