Research by Moneyfacts.co.uk has revealed a dramatic drop in the number of cash ISA products and average rates available today compared with this time last year.
A total of 325 variable and fixed-rate cash ISA deals are currently offered compared with 420 in April 2012. At the height of the ISA season in March 2013, ISA numbers peaked at just 334, 17% less than the same month last year.
Rates this ISA season have also proved disappointing, with the average long-term fixed-rate ISA standing at 2.41% today. Often considered to be a safe bet in achieving a decent tax-free return, this average stood at a much healthier 3.58% in April last year.
Sylvia Waycot, Editor at Moneyfacts.co.uk, believes the Government's Funding for Lending Scheme is to blame for such low rates and poor choice in the tax-free savings sector.
"Up until recently, ISA season was a sure bet," she said. "There would be a glut of new products, a mini interest rate war and an enormous amount of marketing bestowing the virtues of putting your money into an ISA, but not this year.
"As a knock-on effect to the Government's Funding for Lending Scheme, providers simply don't need savers money in order to lend, and lengthening the project is only going to lengthen savers' pain.
"Savers may be forgiven for wondering "what is the point?", but it is important, if you have the means, that you do use up all of your ISA allowance each year. If you don't and suddenly things get better, you won't be able to reclaim any unused allowance from missed years.
"If Funding for Lending grows, then the unpalatable truth is that savings rates will also stay low and savers will need to combat this by being vigilant for not only the best rates, but ensuring they get the best from the account by understanding the many conditions that can apply," she warned.
Variable rate cash ISAs 1 year fixed rate cash ISAs 2 year fixed rate cash ISAs 3 to 5 year fixed rate cash ISAs
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.