Santander has fired the first shot in the battle for savers' ISA allowances with its new Flexible ISA, which is also available through the Alliance & Leicester brand.
But is it right for you?
What's the deal?
Paying a market-leading 3.50%, the Flexible ISA is available to new and existing customers of the Santander and Alliance & Leicester brand.
The rate is guaranteed to be at least 3.00% above the Bank of England base rate for 12 months and the account offers customers unlimited penalty-free withdrawals.
It has a minimum deposit of £1 and, because this is a cash ISA account, the maximum you can deposit at present is £3,600 or £5,100 for the over-50s.
When the new tax year begins on April 6, the tax-free allowance will rise to £5,100 for everyone, so you could save even more.
Any catches?
A major disadvantage to this deal is that you cannot transfer ISA funds from existing accounts. If you want a better rate for money saved in previous years, you'll need to look elsewhere.
This is a variable rate account but the guarantee that it will stay 3.00% above base rate guarantee makes it a very competitive deal. However, after 12 months, it plummets to Santander's variable rate, which currently sits at 0.50%. You should check the rate and consider transferring your money when that happens.
Verdict
Being unable to transfer old funds into this account will be a major frustration for savers wanting a better tax free return on their funds.
Santander isn't the only institution refusing transfers, this seems to be a bit of a trend among some of the top-paying ISAs at present.
For new ISA savers, however, this is an attractive account - offering a leading rate with unlimited, penalty-free withdrawals.
Top Tip
Even if you can't move existing funds into this particular account, all is not lost - you can transfer money into an account that does allow it as often as you like.
HM Revenue and Customs allows unlimited transfers, as long as you follow the correct transfer procedure. Don't close an existing ISA and open a new one as that money would then lose its tax-free status.
Accounts accepting transfers and offering good returns include First Direct, paying 2.75% on its cash e-ISA account from deposits starting at just £1. If you have at least £9,000 of ISA funds to invest then Santander is offering 2.75% on its Direct ISA account.
In the weeks leading up to the new tax year, we're likely to see many new products coming onto the market, so it's worth watching the rates being offered. You can use our savings tool to compare ISAs and find the right one for you.
Please note: Any rates or deals mentioned in this article were available at the time of writing.
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