Virgin has hiked the rate on the latest issue of its three-year fixed rate ISA up to a market leading 3.50%, providing some much-needed cheer for savers struggling to find decent rates of interest.
Anthony Mooney, mortgage and savings director at Virgin Money said: "Savers have felt the effects of low interest rates in the economy for a sustained period of time now.
While average fixed rates in the savings market have been reducing recently, we are delighted to be able to increase the interest rate on our fixed rate ISA, offering customers a guaranteed return over three years."
Here, we take a closer look at the new offering so you can see if it makes sense for you... . What's the deal?
The previous issue of
Virgin Money's three year Fixed Rate ISA paid 3.30%, but Virgin has upped this rate by 0.20% to 3.50% for the latest issue of the same account. As the account is an ISA, returns are tax-free. You only need a minimum investment of £1 to open the account, and the maximum you can invest this tax year is £5,640. Virgin Money is also offering a one-year Fixed Rate ISA which pays 3.00% - the same rate as the previous issue of this account. The one and three-year accounts can be opened in branches, online, by post and over the telephone. And all Virgin Money cash ISAs accept transfers from existing ISAs. Unusually for fixed rate accounts, customers can withdraw funds during the fixed rate period subject to a charge equivalent to 60 days' loss of interest for the one year account and 120 days' for the three-year account.
Remember that if you want to get your hands on your cash during the three-year fixed rate period, you will lose 120 days' interest, so if you think you will need to make regular withdrawals, you are likely to be better off with an easy access ISA.
Among the current best buy easy access ISAs are ING Direct's Cash ISA, which pays 2.80% annual interest tax-free and Santander's Direct ISA Issue 11, which pays 2.75% annual interest tax-free.
The ING Direct account can be opened with a minimum investment of £1, and the rate is guaranteed for a year, after which you may want to move your money.
The Santander ISA can be opened with a minimum investment of £500, and the rate includes a 2.25% bonus which is only payable for the first 12 months, so again you may want to move your money at the end of this period.
If you don't want an ISA which includes a short-term bonus, then Virgin's Easy Access Cash E-ISA pays 2.85% and can be opened with a minimum investment of £1. With all these ISAs there are no withdrawal restrictions, so you can get your hands on your cash whenever you need to. Verdict
Given the current backdrop of falling savings rates, Virgin's move is great news for savers searching for decent returns.
Halifax, Sainsbury's Bank, Santander and West Bromwich Building Society have all either reduced some of their ISA rates or withdrawn accounts in recent days, making it much harder for savers to find competitive rates of interest. With so many providers lowering rates, Virgin's new issue of its three-year Fixed Rate ISA is likely to prove popular, so savers who are interested shouldn't delay as it may not be around for long. Top tip
While the Virgin ISA allows withdrawals subject to an interest penalty, 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. 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.
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