Banks hammer 'Super Isa' savers as rates crash

Adrian Holliday
money, pensions, tax, savings, Isas rates, best buys
money, pensions, tax, savings, Isas rates, best buys

Savers have been dealt a severe blow after more than a dozen banks slashed their rates on cash ISAs.

Remarkably, the move comes just one month after the chancellor unveiled dramatic changes to ISAs in a bid to make saving more attractive.

Make sure you earn the top rate on your savings: compare rates

Losing money
"In real terms, they [UK savers] are losing money," says independent financial adviser Tim Sutcliffe from Shrewsbury-based Pi Financial, "but with Bank of England bank rates at 0.5% and banks awash with cash from the Funding for Lending scheme, banks don't have to offer a decent rate of interest - because they don't want the money in the first place."

The savings rate carnage is all over the place. For example, Barclays Freestyle Cash Isa recently paid 2.76%, but a 1.48% cut now makes it worth just 1.28%. Yorkshire Building Society has pared down rates, from 1.25% to 1% for its Instant Isa.

Protect your savings from the taxman: compare cash ISAs

Other options?

Alternatives? Market Harborough Building Society has launched a 120-day notice account paying 1.45% yearly. However, savers must invest from £25,000 up to a maximum of £150,000; it also can be operated online.

"Internet investors," says Moneyfacts, "will be excited by this latest account from Market Harborough Building Society. Paying 1.45%, this deal heads straight to the top 10 in the market. This account is likely to prove a popular choice for savers looking for a fuss-free online account."

Perhaps, but 1.45% is still a fairly rotten deal when UK inflation is 1.9%. Meanwhile UK wages remain stagnant and house prices continue to surge. There's very little protection for your savings out there currently.

On hold...again

When interest rates do finally rise - this morning the Bank of England's rate-setting committee voted to hold rates at 0.5% again, marking five years at this level - lenders still don't have to pass on any rise.

So it's essential you take the time to shop around and ensure your money is earning the best possible rate. Take a look at our ISA best buys.

Some more articles you might enjoy
Where to earn most interest on your cash
How to protect your family from the unexpected
Seven year bond pays 3.52%
Protect your savings from the taxman: compare cash ISAs

Bank of England Announces Mortgages Cap
Bank of England Announces Mortgages Cap