This week marks the start of the brand new tax year, and that means you need to think about how to make the most of your tax-free allowance.
As of now you can put up to £11,880 in an ISA, £5,940 of which can be saved as cash (until the new limit of £15,000 is set in July), but to really make the most of it you shouldn't just blindly continue adding to the account you set up a year or two ago – because if you're not careful, that account could be offering a miserable return.
What's wrong with my current ISA?
You might have been happy to continue paying into your current ISA without giving it a second thought, but the issue is this – you might not be getting as much as you anticipated.
If you took out the top-paying account a year ago your rate could easily have been slashed, particularly if it was initially boosted by a generous bonus. Those deals will usually only last for 12 months, after which the bonus will be removed and the rate will significantly drop, in most cases leaving you with far less than 1%.
It could be even worse for those who took out ISAs several years ago. Some older accounts now pay as little as 0.1%, a truly meagre return on your investment, but if you didn't pay attention and missed notifications from your bank you might never know.
It's worth bearing in mind, however, that this only applies to variable rate accounts, as if you took out a fixed rate ISA a few years ago you'll of course still be getting the same interest. However, you should still make a note of that maturity date to ensure your cash doesn't get rolled over into a poor alternative, because with fixed rates having plummeted over the last few years you might get a shock if you didn't do your homework.
As you can see, complacency will get you nowhere. Banks and building societies rely on a certain level of saver inertia but if you leave your money where it is they rarely reward loyalty. That's why it's so important to be proactive, shop around and find the best rates yourself.
But, what about the lack of ISA season? Hearing about the run of record-low rates could well make you even less inclined to bother switching, but there are still good deals to be found – if you know where to look. Currently the top-paying easy access ISA comes from Stafford Railway Building Society paying 1.75%, or if you're willing to give a bit of notice to access your cash you can get 1.80% from Earl Shilton for its 90 Day Cash ISA.
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