New! Top-paying ISA rates for Santander customers

Are you a Santander 123 or Select customer? You’ll now be in line for two top-paying cash ISAs – one if you want to lock up your funds for higher returns, and the other if you would prefer to retain access to your money.

Money saving and ISA

What are the deals?

Santander’s 2 Year Fixed Rate ISA pays a fixed tax-free rate of 2.00% AER (annual equivalent rate) for two years to new and existing Santander 123 customers (with either a 123 Current Account or a 123 Credit Card) and Santander Select customers.

The Direct ISA Saver, meanwhile, offers a variable tax-free rate of 1.50% AER, again to 123 and Select customers.

You can still apply for both accounts if you are not (or are not planning to become) a 123 or Select customer, but you’ll receive a lower rate of 1.50% and 1.00% respectively.

Both accounts allow transfers in (this must be done within 14 days of opening the 2 Year Fixed Rate ISA) and require a minimum deposit of £500.

The 2 Year Fixed Rate ISA can be operated in branch, by phone and online, while the Direct ISA Saver can be operated by cash card, telephone or online.

Who are they good for?

The two accounts are an attractive option if you are:

  • looking to transfer existing ISA funds to a more competitive tax-free shelter 
  • looking to invest new funds in to a cash ISA (you can invest up to £15,000 in the current tax year – 2014/15).

Obviously the accounts will be more appealing to Santander 123/Select customers, but they are still worth considering even if you bank elsewhere.

Any catches?

With the 2 Year Fixed Rate ISA, you must leave your funds untouched until May 1, 2017. Should you need to access your money before then, you’ll be charged the equivalent of 120 days’ interest.

“You must leave your funds untouched until May 1, 2017...”
Although the Direct ISA Saver allows you to access your funds at any time, remember that as with all ISAs, if you take any money out of your account, you won’t be able to pay it back in again until your fresh tax-free allowance kicks in at the start of the new tax year (£15,240) on 6 April. Also bear in mind that the interest rate is variable so could change at any time.

What’s the verdict?

The two new accounts from Santander are well worth considering if you are looking for a competitive tax-free home for your savings.

In fact, the 2 Year Fixed Rate ISA can only be beaten by the Clydesdale/Yorkshire Bank’s Cash ISA Fixed Rate Bond which pays 2.10%.

BUT you will need a larger deposit of £2,000 and the account can only be operated in branch – not so handy if you don’t have a branch local to you.

Meanwhile, the Direct ISA Saver sits slightly behind the HSBC Loyalty Cash ISA, paying 1.60% variable.

BUT you will need to be an HSBC Premier customer. And the 1.60% includes a bonus of 1.09% for 12 months so you will need to transfer your funds after this time.

If you are not an existing Santander customer and do not qualify for the top rates with the new Santander ISAs, shop around to see what’s available.

The Post Office, for example, is offering a new Online Cash ISA which allows you to spread your £15,000 annual allowance across four separate accounts.

This includes a two-year fixed rate ISA paying 1.95% and an easy access option, paying 1.50%. You can read more about this in Laura Howard’s article.

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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