10 per cent cash Isas from Abbey and Alliance & Leicester
What’s the deal?
Cash Isas paying 10 per cent – subject to taking out a separate product – from two of the biggest savings providers.
Abbey’s Super Isa (Issue 2), available from Monday, requires savers to put an equal amount into the bank’s Guaranteed Growth Plan or an investment fund.
The 10 per cent rate is variable and payable for 13 months, subject to base rate changes.
Also from Monday, Alliance & Leicester’s Premier Isa Issue 2 is available to new customers taking out a qualifying current account. It is already on offer to existing Premier banking customers who put £5,000 into an investment. A&L’s deal is also variable, payable until June 2009.
Is this good?
A tax-free 10 per cent compares well with mainstream Isa rates of around 6 per cent. But the top rate is only available for a year. Rates are then matched against Isas currently paying 4.75 per cent (Abbey) and 5.25 per cent (A&L).
If savers were already planning to open a qualifying current account with A&L, or invest the required amount with Abbey, the Isa certainly looks a good deal.
What about the “linked” products?
These look like a mixed bag, and savers should weigh up whether the additional Isa return will cost them elsewhere.
Abbey’s Guaranteed Growth Plan offers either a minimum basic return (6 per cent over three and a half years or 18 per cent over six years) or half the stock market’s capital growth. So if the FTSE 100 rises 40 per cent, investors receive 20 per cent. Even Abbey admits the plan offers potentially low returns and may struggle to outperform cash.
A&L’s qualifying Premier account pays just 1.5 per cent, although it also offers free travel insurance. Other eligible accounts have high initial rates, but Premier
50 has a £10 monthly fee while Premier 21 is only
for 16 to 21-year-olds.
What are the alternatives?
Choosing separate best buys may offer a better deal overall. This Spring’s Isa “season” should see the launch of further competitive accounts, many without such catches.
Equally, if it’s possible to benefit from a top-paying “linked” savings deal care of a product already held, then it’s worth considering.
How do I find out more? Abbey’s Super Isa is available through branches, on 0800 234 6065 or at www.abbey.com. A&L is at www.alliance-leicester.co.uk or on 0800 068 6699. See all cash Isa listings at www.moneyfacts.co.uk
