You can invest up to £5,340 into a cash ISA this tax year, and the same amount into stocks and shares. Alternatively, you can invest the full amount into stocks and shares.
For savers who prefer not to take any risks with their money, the good news is that banks and building societies are busy launching plenty of competitive cash accounts in the run up to April 5.
Cheshire Building Society is one of the latest to enter the fray, with an ISA paying a generous 3.06% tax-free. We examine the small print to see if this could be the account for you... .
What's the deal?
Issue 1 of Cheshire's Direct Cash ISA pays 3.06% annual interest tax-free. This rate includes a bonus of 2.06% which is payable until the end of September next year.
You need a minimum investment of £1,000 to open this account. Savers can apply for the account either online or by phone and can make as many deposits and withdrawals as they like by post without loss of interest.
Matthew Wyles, group distribution director at Nationwide Building Society (which now owns Cheshire Building Society) said: "It's an account that offers savers the best of both worlds - a competitive rate to make the most of their tax-free allowance combined with the benefits of easy access. If you're trying to find the balance between rate and access then this account should certainly fit the bill."
Alternative high-interest paying cash ISAs available at the moment include ING Direct's cash ISA which pays 3.00% annual interest on a minimum investment of £1, and this rate is guaranteed for a year.
After the first year, however, the rate reverts to ING Direct's standard variable cash ISA rate which is 1.00%, so again you may want to move your money then. This account also does not accept transfers.
Any catches?
The Cheshire account has a substantial bonus included in the rate, and once this disappears, savers will be left earning just 1.00%, based on the current rate of interest.
That means anyone considering this account will need to move their money once the bonus goes to ensure their savings continue to earn a competitive rate of interest.
The building society says that it will write to customers around a month before bonus expiry to notify them that their bonus is coming to an end.
The account also doesn't accept transfers from existing ISAs, so you can only invest the maximum £5,340 allowed this year. If you are looking for an account which does accept transfers, then Nationwide's Online ISA may be worth considering.
It pays an impressive 3.10% annual interest if you have £1,000 or more to invest. This minimum deposit was reduced from £25,000 on Friday, February 17, meaning many more savers will qualify. The ISA comes with a bonus rate of 2.10% which is fixed until September 30, 2013.
Verdict
The Cheshire ISA is a great option for anyone who has yet to use their ISA allowance this year as it offers the market-leading rate for balances of £1,000 or more. However, make sure you move your money when the bonus disappears, otherwise your returns will plummet. If you are looking to transfer money held in existing ISAs, then you will need to go for an alternative account.
Top tip
While the Cheshire account is appealing because it pays a high rate of interest and you can make withdrawals whenever you want to, remember that if you invest the full £5,340 allowed and then take money out, you cannot subsequently top up the account that tax year.
You should therefore try to leave ISA savings untouched for as long as possible In order to earn the maximum possible tax-free returns.
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