Banks hammer 'Super Isa' savers as rates crash

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.

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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.

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Protect your savings from the taxman: compare cash ISAs