Look Out For Better ISA Rates
Interest rates on Cash ISAs are already on the increase in the wake of the Bank of England's surprise base rate rise.
It may be jumping the gun a bit so soon after the latest surprise interest rate rise but savers should be watchful over the next few days and weeks -- especially those with money in Cash ISAs.
Being able to shelter up to £3,000 a year from the taxman is only one bonus of the Cash ISA. Another is that the rate of interest is usually higher than ordinary savings accounts.
Although banks tend to be swift at passing on rate rises to borrowers and rather slower to hand on the benefits to savers, among the first to react to the Bank of England's rate rise was the Treasury-backed National Savings & Investments - or the Premium Bond people as I like to call them.
Its Direct Cash ISA has been offering a consistently good rate for several months now and but it shot to the top of the Best Buy charts a few hours after Thursday's announcement when it boosted its Direct ISA interest rate to 5.8% with immediate effect.
NS&I guarantee the rate to be at least 0.55% above base rate until 5 April 2008 at the earliest so for those who have yet to open a Cash ISA in this financial year, it's a no-brainer.
Unfortunately, savers who've accumulated funds over the past few years cannot switch the whole caboodle to NS&I as they don't accept ISA transfers. Boo! Hiss! But, apart from the fact that the minimum initial deposit is £1,000, there are no other catches.
When checking the Best Buy tables over the next few weeks, make sure you pore over the small print. It's important to know whether any seemingly high-interest bearing accounts include a temporary bonus rate which means your money will be earning less over the year after the introductory rate has expired. Watch out too for penalties should you wish to transfer your money elsewhere at a later date.
Above all, if an ISA provider allows you to transfer in current funds, make sure you get them to handle the process for you. Remember that your money must always be transferred by your old provider to your new one and not withdrawn by you, otherwise you'll instantly lose all the tax benefits.