Given that the Bank of England has set base rates at just 0.5%, achieving the highest cash ISA interest rate on personal savings is extremely important. Whilst a saver isn't going to become rich overnight, there are a number of ways to ensure that the best possible return is achieved. Don't settle for the first rate offered by a bank as there are a number of online deals that aren't widely available on the high street.
Individual Savings Accounts
Under current Inland Revenue rules, an ISA is a form of tax-free savings. Savers born prior to the 5th April 1960 can invest up to £5,100 in a best buy cash ISA. Those born after this date can currently only invest up to £3,600, but this is set to change on the 6th April 2010. Up to £10,200 (or £7,200 for under-50's) can be invested in a stocks and shares ISA or divided equally between equities and cash.
Perform an ISA Transfer
It is advisable to move funds to an Individual Savings Account offering the best ISA rate. The process should be initiated through the new provider, not the old one. An ISA transfer should be completed within a 30 day period, although this could be affected by business volumes- especially towards the end of the current tax year. Those with variable rate ISA's should check cash ISA interest rates at least once a year.
Cash ISA Interest Rates
Whilst a saver can visit high street banks to find the best buy cash ISA, it isn't a terribly efficient method. It is far more effective to use an online comparison site, such as uswitch.com or moneysupermarket.com. These sites allow someone to trawl through the cash ISA interest rates offered by all the leading banks and financial institutions based on specific search criteria.
Fixed Vs Variable Rate Cash ISA Interest Rates
The returns on a fixed rate ISA deal will be higher in return for locking up money for a specific period of time. Early withdrawal will incur a penalty that is equivalent to x months of interest. Bank base rates are low and look set to stay that way, but it is impossible to be 100% sure. Should the saver feel that interest rates are likely to rise, a variable rate ISA would be the better option.
Achieving the best possible cash ISA interest rate isn't a complex process, but it does involve a bit of research. Too many savers become complacent and simply accept the rate that is offered by their high street bank. Use a comparison site, such as uswitch.com, to find the best buy cash ISA at least once every 12 months. Make the most of tax-free savings allowances before April 5th each year.
Sources
"Individual Savings Accounts." HM Revenue and Customs.
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