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New £15,000 ISA limit fails to ignite interest

New £15,000 ISA limit fails to ignite interest

Category: ISAs

Updated: 24/09/2014
First Published: 24/09/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It's official – the longed-for ISA revival has failed to materialise. It had been hoped that the new £15,000 allowance, officially launched in July, would re-invigorate the sector to result in more competition and (ideally) higher rates, but not even the biggest hike in tax-free allowance since the launch of ISAs has been able to stir the savings market from its apathy. can reveal that the ISA sector has instead remained largely subdued, continuing the theme witnessed over the last year, and the majority of rates have actually fallen further since the increased allowance was announced in March.

The figures show that the average no notice cash ISA rate fell in August to reach a new low of 1.17%, the fifth consecutive monthly drop and the lowest rate seen since Moneyfacts began recording this measure in 2007. The average of the notice ISAs saw a very marginal increase in rate of 0.01% to stand at 1.30%, however this is still one of the lowest rates seen in the last 12 months.

Both rates have fallen substantially since April - the height of the traditional ISA season - being down by 0.07% and 0.16% respectively. Fixed cash ISA rates have also fallen since April, and although they posted slight increases in August, the average one-year fixed ISA has dropped by 0.08% in the last five months.

The increased allowance has also failed to boost the number of ISA products available, with providers themselves clearly being uninspired to offer anything of interest to savers. There are currently a total of 283 ISAs available, which is the lowest number seen in the last 12 months, and a far cry from the 403 products on offer in 2012, prior to the launch of the Funding for Lending Scheme (FLS).

The table below shows the drop in rates in more detail, where we can see average rates prior to the FLS' launch and those following it.

Sept 2014

Jul 2014
(£15K limit)
Apr 2014 Jan 2014
(FLS ends)
Apr 2013 Aug 2012
(FLS starts)
Apr 2012

No Notice cash ISAs








Notice cash ISAs








1 Year Fixed Rate Cash ISAs









As the table illustrates, savers are still paying the price for FLS and rates have still not returned to the previous highs, which saw the average one-year fixed ISA paying 2.94% – almost double the 1.51% of today.

It shows the surprising lack of impact the new allowance has had, and how far the sector has fallen since the introduction of the scheme. Initially touted as a way to boost the mortgage market, the FLS had the unwelcome consequence of decimating the savings sector as a result, as providers simply didn't need our cash to boost their reserves.

And, by all accounts, they still don't, so even though the FLS has now been withdrawn for residential lending, providers still aren't feeling the pressure to increase rates or improve their offerings.

Sylvia Waycot, editor at, commented on the findings:

"The fall in average cash ISA rates to the lowest level since 2007 clearly shows just what little impact the new allowance has had. Rather than reinvigorating the savings market with a raft of new products, improved competition and higher rates, the launch has, to all intents and purposes, been a flop.

"Provider apathy has got to be the key driver behind this contracting, and lower-rate, market as they don't want or need savers' money, and a tax-free wrapper makes it no more palatable.

"What had the potential to be the biggest ISA season since the account's launch has failed to have a significant impact – it's now two months since the allowance was introduced and rates are still at historically low levels, product numbers continue to fall and the ISA market as a whole remains subdued.

"Despite the hype surrounding the new allowance, it's as though providers have decided to just sit this one out."

What next?

Want an alternative to ISAs? Consider high interest current accounts

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.