The top new tax-free savings account

The top Cash ISA has been pulled, but in its place comes a new market-leading rate.

Coventry BS has pulled its market-leading Poppy ISA, replacing it with a new two-year Cash ISA.
Coventry's Poppy ISA was launched shortly after the start of the new tax year and paid out 2.60%.%VIRTUAL-SkimlinksPromo%
Although this rate isn't that exciting, it was the market-leading ISA. It came with a bonus of 1% attached for the first year, and didn't allow transfers in from previous ISA allowances. Savers flocked to open the account, leading to its withdrawal.

Unfortunately The Coventry isn't the only provider to have pulled one of its ISAs. Leeds Building Society and Santander both withdrew similar accounts just days after the new tax year began.

As rates are so dismal right now, thanks to the Government's Funding for Lending Scheme (FLS) which has given providers access to cheap money, savers are desperate to get their hands on whatever interest is offered.

This time last year the average cash ISA rate was 2.65% and now it's a lowly 1.82%, far below the current 2.8% rate of inflation.

The replacement ISA
The replacement ISA is paying a lower rate of 2.55% and is a two-year fixed-rate account.
This means you're not able to get your hands on the cash for the two-year period and you can also only open it by putting in this year's full cash allowance of £5,760.

It's a lower rate than the Poppy ISA and it's a more restrictive home for your cash. But it's still the top option in the two-year ISA market.

Here's how it compares

As you can see, unless you have the full ISA limit to invest, the Coventry ISA is not much use.
Our article - The best Cash ISAs for the new tax year – lists the rest of the new accounts still available.

Alternatives to ISAs
As with the whole of the savings market right now, the ISA offering has been dismal and there is not a lot to choose from.

One option if you've got savings to put away is a standard savings account, but the rates aren't much better here and you don't get the same tax benefits.

Peer-to-peer lending is another option and the rates on offer are around 5% - so much higher than you would get from a savings account. These work well because you liaise directly with the person you are lending money to and therefore you can set the interest rate you want.

Choosing a current account which pays interest is another choice. Nationwide pays 5% and Santander pays up to 3% so with both of these you're getting a better rate than if you put the money into a savings account.

You can read about other options in our article - The best alternatives to Cash ISAs.

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Budget 2013: Winners and Losers
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The top new tax-free savings account

The Chancellor has cut the price of beer. He said a planned 3p rise in beer duty tax was being scrapped and replaced by a 1p cut on a pint of beer.

While lower interest rates are intended to boost borrowing for business and keep costs down for mortgage customers, the Chancellor brings another Budget devoid of encouragement for savers. Faced with near 0% interest rates and 3% inflation, there is no help for those who need to save for the future, or those that already live on their savings in retirement.

"Low interest rates are making life ever harder for people reliant on their savings. Their spending power is being reduced and their standard of living eroded on a daily basis," said Simon Rose of Save Our Savers. "The attack on savers is short-sighted and undermines the country's prospects for investment, growth and retirement."

A major headline-grabbing measure to help struggling first-time buyers is the new Help-to-Buy scheme. Made up of two parts, the first commits £1.3bn to shared equity loans that enable first-time buyers to borrow up to 20% of the value of a new build home towards a deposit, providing they can contribute 5% themselves. The loans will be interest free for five years and be repayable on house sale. The scheme will cover all new properties up to £600,000 in value – around 90% of all new homes in the UK.

The second is a Mortgage Guarantee for lenders, intended to help all families who are struggling with deposits. The scheme will make £130bn worth of mortgages available from 2014 and enable lenders to offer loans at higher-to-loan value, which will Mr Osborne said will "dramatically increase" the availability of mortgages. The guarantee will run for three years and apply to bold old and new property. Stephen Noakes, Mortgage Director at Lloyds Banking Group, commented: "We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme, will give a much needed boost to the housing market and most importantly address the issue of accessibility. "Crucially, this scheme will not only help first time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention. Whilst the property market is likely to continue to be challenging, the fresh support announced today will have a real knock on effect across the whole of the housing market and we expect it could help around 50,000 people a year."

Payment of taxes is the "glue that holds the economy together" the Chancellor said as he reaffirmed his commitment to crackdown on evasion and the professional services that advise on it. "With more measures to rein in Corporate Tax avoiders, the Chancellor has sent a clear message that aggressive avoidance is no longer acceptable," said Martin Hook, Managing Director of research and development tax specialists, Alma Consulting Group. "This will have a significant impact on the Big 4 and other firms who market tax avoidance schemes and will need to consider the morality of the schemes that they sell and the spirit of the tax legislation."

As was widely predicted, Osborne froze the fuel duty hike due in September 2013. He announced that his repeated scrapping of this duty has saved the average Ford Focus owner £7 on every tank of petrol.

Stating his commitment to helping entrepreneurs get ahead and recognising that the cost of employing people is a huge burden to small firms, the Chancellor announced a surprise move with National Insurance relief of £2,000. Called the Employment Allowance, he said the new measure means than 450,000 small businesses – which account for one third of all companies in the UK - can employ one person earning £22,000 or four people earning the minimum wage, without paying National Insurance.

"The Employment Allowance will certainly be a massive boon for small businesses. Not least because most weren't really expecting it," said Jonathan Elliott, managing director of MakeItCheaper.com. "Put it another way, a £2,000 saving for a typical small business is the equivalent of cutting their annual energy bill in half or putting 1,250 litres of free fuel in its fleet of vehicles." Yet the Government fell short on support for new enterprises, explains John Williams from Kuber: "Noticeably absent from the Chancellor's speech was any news of extending or enhancing the Enterprise Investment Scheme (EIS). Many were hoping to see the Government offer more help to start-up companies looking for second round finances, but nothing materialised."

There was bad news for public sector workers, who will see pay increases limited to 1% in 2015/2016. The government will also revisit 'progressive pay' which sees pay increase automatically each year which he said was 'difficult to justify' given that private sector pay has been frozen or cut. The armed forces, however, will be exempt from this.

Feeling the pressure on help working families, the Chancellor made a welcome announcement that working parents will receive a contribution from the Government towards the cost of childcare. Working parents will receive 20% - equivalent to the basic rate of tax - of their yearly childcare costs, up to a total of £6,000 per child. He said the move will save a typical working family with two children under 12 up to £2,400 a year.

Also, leaked this morning was the news that the Chancellor will raise the income tax threshold to £10,000 from April 2014 – a move he said will give 2.4million people at tax cut of over £200 each a year, as well as lifting two million people out of income tax altogether.
Yet while both moves are widely welcomed, they do little to counter the austere measures of previous Budgets, explains Clare Francis, editor-in-chief at MoneySupermarket.com:"Giving with one hand may be a positive, but taking away with the other through other tax increases and benefit cuts means that people are no better off. "In fact, the cumulative effect of this and previous budget changes, combined with wage stagnation and rising living costs means millions are worse off and an increasing number of families are on the breadline, struggling to make ends meet every month."
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