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C&G cash ISA replacement?

amictus
amictus Posts: 301 Forumite
in ISAs & tax-free savings
I've just got my first job and am now in a position to make full use of cash ISA. I currently have a standard cash ISA with Cheltenham and Gloucester, but, after checking my interest rate, it looks as though I may be getting a bit of a raw deal. It looks as though I am getting a rate of 0.05% (sorry can't post link)... am I reading this correctly?

My current account is with Natwest. They seem to offer a pretty decent e-ISA with 2.25%. Hopefully it would be pretty straightforward to transfer my ISA savings over too.

So, my question is, have I missed something here? Does the C&G account have some benefits which I haven't considered? (I realise the Natwest e-ISA is online only... but my C&G doesn't even offer online banking!)

I suppose there's also the consideration of whether Natwest is the best provider. I've had a very quick look and identified another couple of possibilities; egg offers 2.5% and IF offer 2.75%. I'm not really interested in higher rates due to introductory offers, as I'd prefer long term stability with a slightly lower rate.


All this is a bit new to me, so any advice you can give me would be very welcome!
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Comments

  • opinions4u
    opinions4u Posts: 19,411 Forumite
    owains wrote: »
    I've just got my first job and am now in a position to make full use of cash ISA. I currently have a standard cash ISA with Cheltenham and Gloucester, but, after checking my interest rate, it looks as though I may be getting a bit of a raw deal. It looks as though I am getting a rate of 0.05% (sorry can't post link)... am I reading this correctly?
    I haven't checked, but it wouldn't surprise me.
    My current account is with Natwest. They seem to offer a pretty decent e-ISA with 2.25%. Hopefully it would be pretty straightforward to transfer my ISA savings over too.
    It should be. Check that they accept transfers in to it first though!
    So, my question is, have I missed something here? Does the C&G account have some benefits which I haven't considered? (I realise the Natwest e-ISA is online only... but my C&G doesn't even offer online banking!)
    A convenient branch location? Oops not for much longer! I doubt it has any benefits for you.
    I suppose there's also the consideration of whether Natwest is the best provider. I've had a very quick look and identified another couple of possibilities; egg offers 2.5% and IF offer 2.75%. I'm not really interested in higher rates due to introductory offers, as I'd prefer long term stability with a slightly lower rate.
    They will all, eventually, whittle away your rate to make a profit out of you. I'd suggest staying ahead of the game by moving your ISA around at least once a year.

    You should also consider fixed rate ISA options. You may be able to get 3% or more guaranteed.

    www.moneyfacts.co.uk and www.moneysupermarket.com/savings are worth a browse.
  • amictus
    amictus Posts: 301 Forumite
    opinions4u wrote: »
    I haven't checked, but it wouldn't surprise me.

    It should be. Check that they accept transfers in to it first though!

    A convenient branch location? Oops not for much longer! I doubt it has any benefits for you.

    They will all, eventually, whittle away your rate to make a profit out of you. I'd suggest staying ahead of the game by moving your ISA around at least once a year.

    You should also consider fixed rate ISA options. You may be able to get 3% or more guaranteed.


    Thanks for your advice.

    I've had another look and I still can't spot any reason to stay with the C&G account. I just find it hard to believe that the 0.05% rate is right!

    With regards to the local branch... our C&G branch is one of those that has shut, so all transactions have to pass through the Lloyds branch instead! As you suggested, I would be happy with online only access.

    I've thought a bit about fixed rate ISA accounts, but I don't like the idea of being unable to access my money should I need to.

    And surely the providers that don't offer introductory offers need to maintain a reasonable level of interest to attract new customers. Unless I have misunderstood the way these accounts operate, and the rates do actually decrease for customers with time. Does this make sense?
  • Baldur
    Baldur Posts: 6,565 Forumite
    owains wrote: »
    And surely the providers that don't offer introductory offers need to maintain a reasonable level of interest to attract new customers. Unless I have misunderstood the way these accounts operate, and the rates do actually decrease for customers with time. Does this make sense?
    Variable rates are variable rates - in general, most providers (especially high street banks/building societies) tend to offer good rates to attract potential savers (whether by bonus offers or not) then gradually reduce the interest or close that particular issue to new applicants and offer reduced rates.

    For the most consistent Cash ISAs, see:

    Over 18 months - http://www.moneyfacts.co.uk/money/consistent/3/consistent-mini-cash-isa-18.aspx

    Over 36 months - http://www.moneyfacts.co.uk/money/consistent/4/consistent-mini-cash-isa-36.aspx
  • amictus
    amictus Posts: 301 Forumite
    I was thinking of choosing a high-ish rate account and then just sticking with that long term. I liked the look of the Natwest e-ISA (2.25%), as they also provide my current account. However, from what you have said, it looks as though the provider is likely to decrease rates if i stick with them, leaving their highest rates to new customers only. How quickly are these rates likely to decrease? I mean, will I see it dropping below 2% in a year? (I realise it's probably not just that simple!)

    So, I suppose I either choose a low rate provider (as detailed in the links Baldur provided) or constantly switch providers to take advantage of new customer rates.

    I like the look of IF online cash ISA (2.75%)... does anyone have any experience with them? Would I lose any benefits in terms of ease of transfer by not going with the same provider as my current account?


    Thanks again for your help!
  • Baldur
    Baldur Posts: 6,565 Forumite
    owains wrote: »
    I liked the look of the Natwest e-ISA (2.25%)
    Lots of people also liked the look of the e-ISA when it offered 3.25%/3.51% - prior to the rate reduction on 15th May for new applicants.
  • amictus
    amictus Posts: 301 Forumite
    Baldur wrote: »
    Lots of people also liked the look of the e-ISA when it offered 3.25%/3.51% - prior to the rate reduction on 15th May for new applicants.

    Hmmm I didn't realise these variable rate accounts are subject to such large changes. In light of this I have been looking at some fixed rate ISA accounts was suggested earlier. I think this probably makes sense, particularly as I intend to open a instant access normal savings account.

    Northern Rock offers Fixed Rate Cash ISA accounts with 3.30% (until 2012 for issue 110 and 2014 for issue 111). I'm a little bit confused about how these accounts operate... perhaps someone could help me out a bit?

    The issue 110 account has the following key features (from the website, sorry but can't link directly)...
    • Combines tax-free savings with a guaranteed interest rate throughout the term of the account.
    • Invest from £500 up to a maximum of £3,600 each tax year, whilst the Fixed Rate Cash ISA is available to new customers.
    • Fixed Rate Cash ISAs are intended as longer term deposits, although you can have access to your money, subject to a charge equivalent to 120 days' loss of interest on the amount withdrawn from issue 110.
    • This is a strictly limited issue and may be withdrawn at short notice. To avoid disappointment, please submit your application as soon as possible.
    Does this mean I would be able to transfer money out of the account at any time, just that I have to pay 120 days' interest on the amount I take out? Does this include switching ISA accounts to a different provider (if the rate decreases significantly after 2012, which I imagine it would do)?

    I can't forsee wanting to transfer money any time soon, so this sort of account would make sense rather than an instant access I think. Anyone know of any better options out there? Perhaps a fixed rate account with less harsh transfer penalties?

    Thanks again guys!
  • Baldur
    Baldur Posts: 6,565 Forumite
    owains wrote: »
    Hmmm I didn't realise these variable rate accounts are subject to such large changes. In light of this I have been looking at some fixed rate ISA accounts was suggested earlier. I think this probably makes sense, particularly as I intend to open a instant access normal savings account.

    Northern Rock offers Fixed Rate Cash ISA accounts with 3.30% (until 2012 for issue 110 and 2014 for issue 111). I'm a little bit confused about how these accounts operate... perhaps someone could help me out a bit?

    The issue 110 account has the following key features (from the website, sorry but can't link directly)...
    • Combines tax-free savings with a guaranteed interest rate throughout the term of the account.
    • Invest from £500 up to a maximum of £3,600 each tax year, whilst the Fixed Rate Cash ISA is available to new customers.
    • Fixed Rate Cash ISAs are intended as longer term deposits, although you can have access to your money, subject to a charge equivalent to 120 days' loss of interest on the amount withdrawn from issue 110.
    • This is a strictly limited issue and may be withdrawn at short notice. To avoid disappointment, please submit your application as soon as possible.
    Does this mean I would be able to transfer money out of the account at any time, just that I have to pay 120 days' interest on the amount I take out? Does this include switching ISA accounts to a different provider (if the rate decreases significantly after 2012, which I imagine it would do)?

    I can't forsee wanting to transfer money any time soon, so this sort of account would make sense rather than an instant access I think. Anyone know of any better options out there? Perhaps a fixed rate account with less harsh transfer penalties?
    Personally, I would not even think of fixing for such a long period of time at the present rates. Most of my current fixed rates are for a maximum of one year.

    A 120 day penalty equates to a loss of 33% of your annual interest, so not something to be considered unless you are sure that you will not need early access to the funds.

    Almost invariably, fixed-rate accounts become 'easy access' variable rate accounts on maturity - usually offering a lower rate of interest; but some of these 'maturity accounts' can require a fairly significant notice period for withdrawals other than a small window of opportunity to transfer elsewhere on maturity.
  • amictus
    amictus Posts: 301 Forumite
    Baldur wrote: »
    Personally, I would not even think of fixing for such a long period of time at the present rates. Most of my current fixed rates are for a maximum of one year.

    A 120 day penalty equates to a loss of 33% of your annual interest, so not something to be considered unless you are sure that you will not need early access to the funds.

    Almost invariably, fixed-rate accounts become 'easy access' variable rate accounts on maturity - usually offering a lower rate of interest; but some of these 'maturity accounts' can require a fairly significant notice period for withdrawals other than a small window of opportunity to transfer elsewhere on maturity.

    This seems sensible. I suppose the best thing to do at the moment would be to open an ISA account aiming only to keep it in the short term (6-12 months). This way it's possible to take advantage of initially-high rates, then switch to a more stable (or long-term) account when, hopefully, interest rates have improved. Make sense?!

    With that in mind, how does the Intelligent Finance Cash ISA (2.75% AER/GROSS variable) look as a short-term option?

    Thanks again!
  • Baldur
    Baldur Posts: 6,565 Forumite
    It certainly sounds more sensible (as much as any of us can guess) to have some flexibility in the current financial situation.

    As far as your 'long-term/stable' savings account search is concerned, it's rather like the 'Quest for the Holy Grail' and, in my opinion, has the same mythical element as that quest. Banks operate to make money, not to give savers an easy life.

    The IF account looks fine today - as for tomorrow, who knows?
  • millpond_2
    millpond_2 Posts: 13 Forumite
    Yesterday we transferred two ISAs from Natwest to a Halifax 2-year fixed rate ISA paying 3.5%.
    I think they said the 1-year fixed rate ISA is at 3%.
    Best of luck................
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