Post Office Money launches Isa offering mix of savings options

Online Isa allows split between easy access and fixed savings, but are its rates any good?

Post Office Money, the financial arm of the Post Office, has launched a new Isa that allows you to split your money between easy access and fixed options.

It says the Online Isa has been created in response to the frustration many savers feel about only being allowed to save in one cash Isa per tax year.

Savers will get one account but have the choice of multiple products to invest in, including a variable deal and two fixed rate options.

This means savers can retain access to a chunk of their cash and lock up the rest in order to secure a higher return.

The Online Isa is the first product to be unveiled under the new Post Office Money brand, which launched last month with the aim of becoming one of the UK’s leading financial services providers by 2020.

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What's on offer

The unrestricted Easy Access account pays a joint market-leading 1.50% variable interest and includes a 0.85% fixed bonus for the first 12 months. It can be opened with £100 and additional deposits can be made at any time. Interest is calculated daily and paid in March.

In terms of fixed rates, there's the One-Year Fixed Rate Bond, which pays a competitive rate of 1.55%, or the Two-Year Fixed Rate Bond, which pays a market-leading 1.95%.

Both can be opened from £500 but no additional deposits or withdrawals are permitted during the fixed term. Interest is calculated daily and paid on the anniversary of the account opening.

The Online Isa also comes with a unique ‘Holding Account’, which allows savers to consolidate old and new Isa savings before deciding how to split them across the various products. This pays 0.65% on funds held.

Below is one way you could split £15,000 in savings across the products contained in the Online Isa.

In the example above, the biggest proportion of savings is held in the higher return fixed rate bond and a smaller proportion in the one-year bond while some is kept on hand for emergencies in the easy access account.

But there are plenty of other ways you can split up your savings, especially if you have Isa savings from previous years to use.

You can transfer the Online Isa to another provider at any time but partial transfers are not permitted. However, if you hold a product which is within a fixed term, you’ll incur a Breakage Charge.

Withdrawals can be made to either the Holding Account, where the funds can then be reinvested into other products within your Online Isa and keep their-tax-free status, or a Nominated Account where the cash will lose its tax-free status.

The Online Isa, as you might expect, can only be opened and managed online.

Compare Cash Isas