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Savers want fairness on ISAs

Savers want fairness on ISAs

Category: Savings

Updated: 01/04/2010
First Published: 01/04/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
UK savers think it is unfair for banks and building societies to offer lower rates on ISAs than on other savings accounts.

Almost three quarters (73 per cent) of savers said providers should offer at least the same rate of interest on ISAs as they do on the equivalent standard savings account, which incur tax on interest.

The research, which was conducted by Clydesdale and Yorkshire Bank, also found that on the subject of fixed rate savings, fair play was wanted.

Asked whether providers should pay at least the same rate in fixed rate ISAs as other fixed rate bonds of the same term, three in four customers said they should.

The tax-free shelter that ISAs include means they offer savers a better return than savings accounts with equivalent rates.

To illustrate, a saver would have to find a standard account paying 3.75 per cent to match the return offered by a three per cent ISA. Higher rate taxpayers would have to find a bond paying 6.25 per cent to match the return of a five per cent ISA.

"The message to banks and building societies is quite clear – play fair on ISAs," commented Steven Reid, retail director, Clydesdale Bank.

"Paying at least the same on ISAs as similar standard accounts means that savers get the full benefit of the tax-free status. Paying less on ISAs than similar accounts undermines them and gives savers a poor deal."

Customers were also found to want the ability to transfer in ISA balances and a commitment from providers to meet the deadlines for ISA transfers.

It is estimated that ISA investments will hit the £40 billion mark for the first time this year.

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