Focus on: NEW market-leading cash ISA paying 3.07%

The Bank of England base rate may have been held at 0.5% for the 25th consecutive month this week, but there was some good news for savers this week following the launch of a new market-leading individual savings account (ISA).

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West Bromwich Building Society’s WeBSave ISA 3 account pays an impressive 3.07% annual interest tax-free, and is only available through MoneySupermarket.

Not only does it pay the top rate, it also accepts transfers in and you can access your money whenever you want. So is it the account for you? We take a closer look….

What’s the deal?

The West Bromwich Building Society WeBSave ISA 3  account can be opened with a minimum investment of £1,000. The maximum you can pay into any cash ISA this tax year is £5,340, but this account also accepts transfers from ISAs opened in previous tax years.

Interest is paid annually on 1 December.

The account must be opened and operated online, and is available to UK residents aged 16 or over. You can make unlimited withdrawals without notice.

The rate includes a 1.07% bonus which is only payable for the first year. That means from December 2012, savers will see their interest fall to a variable rate of 2.00% tax-free, and therefore may want to move their money then.

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Any catches?

As the account can only be operated online, it won’t suit savers who prefer branch or telephone access to their savings. You need £1,000 to open the account, so savers with very small sums to invest won’t be eligible.

Savers will need to make a note of when the bonus period comes to an end and consider moving their money so that they don’t end up earning a much lower rate of interest.

Verdict

This is the market-leading ISA currently available and is likely to be extremely popular with savers as it offers the opportunity to earn more than six times the current Bank of England base rate.

The fact that it also accepts transfers makes it particularly appealing, as it means savers can earn the same great rate on all their ISA savings.

For those who would prefer an account which doesn’t include a bonus in its rate, then Northern Rock’s eISA, which is again only available through MoneySupermarket, pays an impressive 3.05% annual interest before tax, and can be opened with a minimum investment of just £1. This account also accepts transfers from existing ISAs.

Top tip

While it is useful that the West Bromwich WeBSave ISA 3 account offers unlimited withdrawals, savers should be aware that if they pay in the maximum £5,340 permitted this tax year and then take money out, they cannot then top up their savings again.

Bear in mind too, that if you are transferring over savings held in ISAs from previous tax years you should never withdraw your money in order to then pay it in, as if you do, your savings will lose their tax-free status.

Instead, you must contact the new provider and ask them for a transfer form, which will usually include a letter you need to send to your existing provider.

Once you have sent this off, your new provider should then arrange the transfer for you and you should start to receive interest within 15 days of your money moving over. 

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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