The account may not sit top of the ISA best buy tables in terms of rate alone but it scores very highly in both simplicity and convenience. We take a closer look at the deal, and whether it could be the right home for your ISA savings.
What’s the deal?
Nationwide’s Instant ISA Saver first and foremost, is open to everyone so you don’t have to have a current account with the building society to be eligible.
The account pays an annual equivalent rate (AER) of 1.50% tax-free if you invest £1,000 or more. You actually only need an initial £1 to invest, but balances from £1 up to £999 will earn just 0.25% AER tax-free. Remember the maximum amount you can invest into a cash ISA this tax year (you have up until April 5) is £5,760. Next tax year (2014/2015), the cash ISA allowance rises to £5,940.
As well as using this year’s ISA allowance (and next year’s if you want to from April 6) you can also transfer in funds from existing cash ISAs. And, as part of Nationwide’s ‘Savings Promises’, you will start earning interest as soon as your application is received rather than from when the account is opened. And the account doesn’t carry a bonus so – while the rate is variable – what you see is what you get.
The new Nationwide ISA can be opened and operated online and in branches, and gives you instant access to your money so you can make withdrawals whenever you want (although, as with any ISA, if you do take out money from the account, you will not be able to top it up again in the same tax year).
Nationwide has also launched a Limited Access Saver account, paying 1.25% AER, which allows five instant access withdrawals each year, and an Instant Access Saver account which pays 0.50% AER and comes with a debit card.
Who’s it good for?
The Instant ISA Saver is a great choice for savers who don’t want to have to keep moving their money around when introductory bonuses disappear, and who are looking for a simple tax-free account that gives them immediate access to their cash should they need it.
It’s also a good option for those who have savings in existing cash ISAs and who are looking to transfer them to an alternative account – as only balances over £1,000 will get the higher rate of 1.50%. You can find out more about how to transfer your existing ISA with our video.
While the rate won’t suddenly plummet after a set period of time as it does with accounts paying an introductory bonus, savers do need to remember that this is still a variable rate account, so the rate can change at any time. It is therefore a good idea to check the rate regularly, and to move your money if you feel the returns you are earning are no longer competitive.
Although the rate on the Instant ISA Saver is respectable, it is possible to earn higher returns elsewhere, although it’s worth bearing in mind that many of the market-leading accounts come with catches.
For example, Earl Shilton Building Society’s 90 Days’ Notice account pays 1.80% AER tax-free, and can be opened with a minimum investment of £10. However, as it says on the tin, you do need to give 90 days’ notice every time you want to take cash out, or you will lose the equivalent amount of interest.
Nationwide itself pays 1.75% on its Flexclusive ISA Issue 7, but you need to hold a Flex current account with the building society to qualify. And, unlike the Instant ISA Saver account, neither of these accounts accepts transfers in from existing ISAs.
The other downside of the Instant ISA Saver account is that you need a balance of at least £1,000 to qualify for the 1.50% rate, otherwise you’ll only earn 0.25% AER. So, as previously mentioned, this account won’t be suitable for savers with only small sums to invest.
What’s the verdict?
The Nationwide Instant ISA Saver is a straightforward no-nonsense savings account, offering a relatively competitive tax-free rate of interest. Although returns may not be market-leading, unlike many of the accounts paying higher rates of interest, this account does not have an introductory bonus and there aren’t any restrictions on the number of withdrawals you can make. It also allows transfers in, whereas many of the market-leading cash ISAs, don’t.
However, Islamic Bank of Britain’s Sharia-compliant Notice cash ISA, which pays a generous 1.80% AER tax-free, does accept transfers and can be opened with a minimum investment of £250. The biggest downside of this account is that you need to give 120 days’ notice before you can make a withdrawal. The Islamic Bank account can be operated online, by post, telephone, or in branches.
Remember that even though an ISA may be instant access, if you use your ISA allowance in full this tax year and then make a withdrawal, you cannot then top out the account, as you will have already paid in the maximum allowed.
Savers who are planning to transfer ISA savings into a new account should request a transfer form from their new provider in order to move their money across. Never, ever cash in your existing ISA savings to transfer them over, otherwise you will lose the tax-free benefit.
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.