Focus on: New market-leading cash ISA for transfers

Published:

04 August 2011

Topic:

News,Money,ISA,Savings,Product review

Interest rates remained unchanged at 0.50% again on Thursday, but there was still some good news for savers last week following the launch of a new market-leading online cash ISA from Northern Rock.

What's the deal?

Savers can invest up to £5,340 this tax year in the new Northern Rock Online eISA, which pays an impressive 3.05% annual interest tax-free. While the rate is competitive, it is not the very highest-paying ISA on the market - but it does come with other major benefits.

First, savers can transfer in any number of balances from other existing ISAs - something that some market-leading deals do not permit.
Second, the rate you see is also the rate you get from day one. In other words, the account does not come with an upfront bonus which disappears after the first 12 months leaving you having to shop around for the next best deal.

The account can be opened with no initial deposit before transfers from existing ISAs or other savings or bank accounts, are made.

Savers will also be given instant access to their cash. If you aren't transferring funds from another provider, then you can open the account with as little as £1.

You must be at least 16 to open this account, and only one account can be held per customer.

Are there any downsides?

The rate is variable so could fall at any time, even if base rate doesn't. Especially if you are transferring significant sums over from other ISAs, this will mean keeping an eye on the rate and checking it remains competitive. That said, Northern Rock promises to give two months' notice of any rate decrease.

Savers will be restricted to annual interest payments only, which will be made on 11 March or the nearest following business day. Interest payments can be paid into the ISA itself, an alternative Northern Rock account or an account with any other bank or building society that the saver allocates.

What's the verdict?

For savers who have ISA balances languishing in low-paying accounts and don't want to lose access to their cash, Northern Rock's exclusive Online eISA is a competitive option.

However, if you don't need access to your money, then you may be able to find even higher rates of interest with a fixed rate ISA. Northern Rock is also offering a market-leading eISA which pays a fixed rate of 4.01% AER for three years.

Remember that if you withdraw cash within this timeframe, you will lose 120 days' interest so you'll need to be sure you can do without the money for the three year term of the account.

You should bear in mind too that while this rate appears competitive now, if the Bank of England starts raising rates soon, it may not look quite as appealing in a year or two, which means an easy access ISA could be a better option.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

Related Links

• Apply for the Northern Rock cash ISA - 3.05% AER
• Compare a range of cash ISAs
• Compare a range of fixed rate cash ISAs

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