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Savings GuideSimplifying Savings

Introduction 4

The cost of delay 6

How safe is your cash? 8

Which type of savings account is right for me?

• Instant access or easy access accounts

• Interest-bearing current accounts

• Notice accounts

• Regular savings accounts

• Fixed rate accounts

• Children's accounts

• Junior ISAs

• Sharia compliant savings accounts

• National Savings & Investments (NS&I)

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Cash ISAs

• Variable rate cash ISAs

• Fixed rate cash ISAs

• Help to Buy ISAs

• Lifetime ISAs

• ISA Transfers

20

Tricks of the Trade

• Introductory bonuses

• Restricted withdrawals

• Lower rates on lower amounts

• Lower rates on higher amounts

22

Taxation of savings accounts 24

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List of contents

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Added to this is the huge increase in the number of providers that cut interest rates for existing account holders since the Funding for Lending Scheme was introduced in July 2012. Prior to this, interest rates rarely changed for existing account holders outside of a base rate change. Since the introduction of the Funding for Lending Scheme, we have seen rate cuts to thousands of accounts, with more happening on a regular basis.

So, it’s vital to shop around for the best possible interest rates for your savings. You also need to find the type of savings account that best suits your particular circumstances and be aware of some of the tricks of the trade that could tempt you into an offer that may not be as good as it appears to be. This is where Savings Champion can help and you’ll find information in this guide and at savingschampion.co.uk to help you make an informed choice.

Once you have chosen the best savings account, it’s no good simply forgetting about it; you need to keep an eye on the interest rate to make sure it remains competitive.

Again, that’s where we can help. If you sign up to our Rate Tracker service, we’ll let you know when the rate changes on your account and how it compares to the top rates on the market.

And if you sign up to our Rate Alerts, we’ll let you know when new accounts come into the market, so you can see if something better has become available that you might want to switch to.

Call us free on 0800 011 9705 with your savings query

Introduction

You often read about ‘savings and investments’, but the difference isn’t always clear. To put it simply: savings refers to the cash you hold in the bank or building society and investments are everything else. There are lots of places to get advice on your investments, but it’s much harder to find advice on savings – this is why we created Savings Champion. Savings are our speciality and sole focus.

While it’s difficult for many of us to imagine setting money aside in such a tough economic environment, it’s really important to try and build up the equivalent of a few months’ income as a minimum, so it can be readily available in case of a rainy day. You never know when there might be an emergency or a change in your circumstances –the boiler might break down in the middle of winter or if you’re made redundant, you’ll still need to pay the bills while you look for another job. You need to be sure you won’t lose any of that money, so where you keep it really matters.

Just £10 a month can make all the difference. While it might not seem much, it’s a great start and over the long term, it can become really worthwhile; after five years, you could be sitting on a nest egg of over £600.

Anyone who’s watched ‘It’s a Wonderful Life’ or who witnessed the panic caused by the 2009 Northern Rock collapse will be familiar with the expression ‘run on the bank’. Thanks to this and the very real economic problems we have been experiencing over recent years, many people are wary of banks and building societies and think keeping that money under the mattress is the safest place. But for many reasons this isn’t the case – it’s just important to be careful when deciding where to put your money.

One of the main enemies of the saver is inflation, especially when interest rates are low, as is the case at the moment. The money you invest will still increase as the interest is added to the account, but the cash value is falling in real terms if the interest rate you are receiving is lower than the rate of inflation. This is because the items that you need to buy in the future will have gone up in price more quickly than the value of your cash.

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Even though the base rate remains at a low level at the moment, there are still attractive rates on offer from some providers.

Of course, it’s difficult currently to find a savings account offering 5% interest on an ongoing basis; so, it's vital to shop around for the best rates available or speak to one of our specialist savings advisers on 0800 011 9705

The earlier you start to save the better, for a number of reasons.

First and foremost, it will encourage a great savings habit. A useful starting point is to plan a budget, identifying all the details of your expenditure each month, so you can work out just how much you can afford to set aside.

This exercise can be very revealing. Not only will it show you how much you are potentially wasting on unnecessary items, it will also indicate the amount you will be able to save on a regular basis.

Once that amount is decided, setting up a standing order from your bank account means that it will become just another bill – but one that will give you money back when you need it.

Starting earlier is also better for your pocket. It's staggering how important the early years of saving are; with the impact of compounded interest, you can build up a substantial savings pot for the future with an early start.

For long-term savers, a delay of just 10 years could halve your savings pot.

For example, if you were to save £200 per month from the age of 25 to 65, assuming an average interest rate of 5% gross, you could build up almost £300,000 – a significant nest egg.

However, if you started just 10 years later at age 35, you'd end up with around £164,000, almost half. Or, to put it another way, you'd need to save about £365 per month instead of£200 in order to match the £300,000.

The prospect of putting all of your long-term savings into the stock market or in a pension plan that can’t be accessed until retirement is not ideal for everyone. It makes sense to have access to some of your money ‘just in case' – and as already emphasised, the earlier you can start, the better.

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The cost of delay

Click here to see which providers are covered by the FSCS and which are based in the EEA and are therefore covered by their own country’s national compensation scheme.

So, to sum up, if you have more than £85,000 to put into savings, spread it around in order to make sure that it is all protected.

The banking crisis of 2008 brought into focus issues around the safety of holding larger sums of money with banks and building societies and savers started to question exactly what would happen if their provider went out of business.

The Financial Services Compensation Scheme (FSCS) was set up under the Financial Services and Markets Act 2000 in order to compensate customers if a firm has stopped trading or is unable to pay claims made against it.

The amount of compensation payable to each customer is limited and the current limit , as of 30 January 2017, is £85,000 per person, per banking licence. For joint accounts,£170,000 is protected. Since its inception, there have been a number of changes to the limit itself, so it is important to keep up to date with any changes and adjust your savings portfolio accordingly.

In addition, since 3rd July 2015, customers with temporary high balances, as a result of a number of specified circumstances – for example the sale of a property, benefits payable from an insurance policy or an inheritance – will be covered up to£1m for up to 6 months, in the event of a provider ceasing to trade. Good news for those that find themselves in these situations, as it means that time can be taken to ensure that a suitable home is found for those funds.

The FSCS is in place to help savers spread the risk, encouraging them to distribute their funds between different providers to ensure that if the worst happens, their savings are safe.

However, as ever, there are some things to watch out for.

Different providers may be owned by one parent company and, as a result, irrespective of the amount of your savings across those providers, only £85,000 in total will be protected per person. To check who is linked to who and how much of your money is actually protected.

Take a look at our FSCS Licence Information Guide to find out more as, in many cases, the providers that share a banking licence are notobvious and can be easy to miss.

As an example, Bank of Scotland plc has one licence that also covers Halifax, Intelligent Finance (IF) and Birmingham Midshires amongst others. In all these cases, the £85,000 limit relates to the combined amount held with any of these providers.

Another thing to watch out for is that some banks operate within the UK, but their parent company is based outside the UK, though within the European Economic Area (EEA). This means that they are covered by their own country’s compensation scheme, rather than the UK FSCS and you will need to check the amount protected. Generally, deposits held with providers covered by European-based compensation schemes are protected up to a maximum of €100,000 per customer.

First of all, it is important that you check the details of each scheme carefully, as they can vary between countries. Secondly, it is important to be mindful of the exchange rate between sterling and euros, as this will govern how much of your sterling-based deposit will be covered by the scheme. It is advisable to take into account currency fluctuation when deciding how much to place with these providers.

Whereas previously there were few providers like this, we have seen more rise to prominence in recent times. For example, Ikano Bank launched in the UK in 2015, but savings placed with this provider are covered by the Swedish Deposit Insurance Scheme (which is managed by the Swedish National Debt Office, ‘Riksgälden’).

If you have any questions or are concerned that your

savings may be under protected, you can speak to one of our specialist savings

experts on 0800 011 9705

Call us free on 0800 011 9705 with your savings query8 9

How safe is your cash?

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Which type of savings account is right for me?Of course, choosing the right type of account isn’t always straightforward. There are a number of different types, which may or may not be appropriate, depending on whether you may need immediate access or would be able to give notice in order to access your cash. Or perhaps you would prefer to know exactly how much interest you will earn over a set period of time?

Here at Savings Champion, our mission is to make each type of account clear to our customers and to help you decide which one is right for you.

The following pages contain a brief guide to the different types of account available.

Of course, if you are still unsure of what is best for you, you can email us at info@savingschampion.co.uk or call our savings experts free on 0800 011 9705.

Instant access or easy access accountsThese are usually simple savings accounts that allow you to withdraw cash without notice. As a result, the interest rates are often lower than on other types of account, although this is a very competitive area of the market, so there are some good deals to be found.

Since the introduction of telephone and internet accounts, instant access accounts are often referred to as easy access accounts. The reason is that these accounts allow you to transfer money to another account or to request a cheque through the post, so there can be a slight delay in actually receiving the money - so the term instant access could be seen as slightly misleading.

Whilst easy access accounts are on the whole straightforward and easy to understand, there are still some aspects of the terms and conditions of individual accounts to be aware of. So, it is important to check exactly what you are getting into.

Some easy access accounts include introductory bonuses, so the rate paid drops after an initial period. Whilst these bonuses are less common now than in the past, there are still a number of accounts on the market that include them. The key here is to be aware that the rate will drop after the initial period, so keep the date in your diary and switch to a better deal when this happens.

Alternatively our Rate Tracker service will send you a reminder when the bonus on your account ends.

Another key thing to be aware of is that with some easy access accounts there is a penalty for making more than a specified number of withdrawals, often in the form of a much lower interest rate paid. It may still be worth considering this type of account, particularly as the interest rates are often higher, you just need to make sure that you will not need more regular access to your funds and plan your withdrawals carefully.

Visit our website for our easy access best buy table

Interest-bearing current accounts are offering some of the very best interest rates currently available and have offered savers a different approach to consider when looking to squeeze as much interest as possible out of their savings.

Whilst these accounts may not be the first place savers will expect to put their funds, the interest rates on offer are, in some cases, more than three times what you can get on an easy access account and you do not have to tie up your funds.

However, these accounts can be restrictive. You must comply with the strict terms and conditions of the accounts to benefit and you are generally restricted to a fairly low maximum balance, so you will not be able to put large sums in the account.

These accounts are usually more complicated than a traditional savings account and there are a number of hoops to jump through and potential hazards to avoid, in order to get the returns on offer. Potential traps to look out for are; low maximum balances, introductory rates, monthly fees, a requirement to set up direct debits, a minimum amount to pay in each month and a minimum amount to maintain in the account.

All of these factors need to be taken into account when choosing an account and if you feel that that you may fall foul of the rules, take a look at one of the alternatives that will suit your circumstances better.

Setting up standing orders is an easy way to ensure you deposit and withdraw the qualifying amounts each month and can be effective in managing multiple current accounts. It may take a while to set it all up in the first place, but the rates on offer could make it all worthwhile. It is also worth remembering that many of these accounts can be opened without having to switch your main current account.

A final point to bear in mind is that some of these accounts give you access to exclusive savings accounts, which often pay competitive rates -especially true with regular savings accounts.

If you need any help with using high interest current accounts as part of your savings portfolio, please call 0800 011 9705 to talk to one of our expert advisers.

Or visit our website for our interest-bearing current account best buy table.

Just as it sounds, these savings accounts require you to give notice in order to access your money without a penalty. The usual notice period ranges from 30 to 120 days, although there are some accounts on the market that require 6 months or even a year's notice. Notice accounts generally pay better rates of interest than easy access accounts, but not in every case. These accounts can be ideal for those able to plan ahead and don't need immediate access to their funds.

Some accounts give the option to forego the notice period by paying a penalty, typically a reduction of interest equivalent to the notice period. This can be taken from the capital if insufficient interest has built up prior to access, so it’s important to plan carefully. However, not all accounts allow this option, so you need to check this before opening an account.

Notice accounts seemed to have gone out of fashion in recent years, particularly amongst the larger high street names, none of which offer this type of account.

However, the rise of the so-called 'challenger banks' in recent years has bucked this trend, with notice accounts, alongside fixed rate bonds, a key area where this new breed of providers have competed.

Institutions like Charter Savings Bank, Shawbrook Bank and Secure Trust Bank have dominated our notice account best buy table in the last few years, injecting some much-needed competition into this often-overlooked area of the market.

For some people, not being able to access their money immediately is important to help them to resist dipping into their savings and it could also be a way of getting a higher return on money that you know you will not need straight away.

Visit our website for our notice account best buy table

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Interest-bearing current accounts

Notice accounts

If you don’t have a lump sum to invest, you can always save a regular amount each month. You can do this with a normal easy access account or notice account or you can take advantage of a regular savings account, which often pay significantly better rates of interest.

Regular savings accounts are ideal for those looking to start getting into the savings habit or to save up for a special purchase.

Of course, there are likely to be some conditions in the form of restricted access and the requirement to pay a regular amount every month for a fixed period, normally 12 months.

Accounts will have different terms and conditions, for example; sometimes you only need to make 11 out of 12 payments for the year, with some accounts you can vary the amount you save - while with others the amount must be the same and occasionally a limited number of withdrawals may be allowed.

In general terms, these accounts are designed for you to save a regular amount each month and to not dip into the funds and the restrictions normally reflect this. It is important to check the terms and conditions of the account before opening it to ensure that you can stick to the rules.

It is also worth noting that many of the top- paying accounts are only available to those who hold a current account with the provider. However, in some cases you will be able to combine this with a high interest current account for even better returns.

There are also regular savings accounts that can only be opened in branch, so are only suitable for those local to the provider.

In both of these cases, the provider is aiming to encourage a deeper relationship with savers, but this could of course be used to your advantage.

Our best buy table always includes at least one account that can be opened without needing a provider’s current account and that doesn’t have to be opened in branch, to cater for all savers.

Regular savings accounts normally offer a fixed rate of interest for a set term, but there are also many variable rate accounts around, so keep your eyes peeled and check out the information on our best buy table.

Visit our website to see our regular savings account best buy table

There are many different terms used to describethis type of account, most commonly Fixed RateBonds, Fixed Rate Deposits or Fixed Rate Savings.

These are accounts that pay a fixed interest ratefor a set term, usually ranging from six months tofive years, although there are a couple ofproviders that offer fixed rates foras long as sevenyears.

Some of the best interest rates available can befound among fixed rate accounts, as you areessentially sacrificing easy access to your fundsfor a better return.

It is also one of the most competitive areas of themarket, especially amongst the newer 'challengerbanks', as it is a great way to entice savers in andalso to know how long the money will be held for,allowing providers to plan ahead effectively.

Unfortunately, this also means that providers dipin and out of the best buy tables when they havesufficient funds, so the top rates do not alwayshang around for long.

Normally you cannot access your money at all untilthe end of the term, although there are providersthat offer some access during the term. Make sureyou check the terms and conditions of individualaccounts before going ahead.

While in a few cases, a limited number of penalty-free withdrawals might be offered, it’s more usual for there to be a hefty penalty, equivalent to a loss of interest earned over a defined period. For example, a one year fixed rate savings account offering access may impose a penalty equivalent to 90 days’ loss of interest on the amount being withdrawn.

Other providers state that funds can only be accessed by closing the account completely, again subject to a penalty.

It is really important to note that any penalty imposed can be taken out of the capital originally invested, if sufficient interest has not been earned at the time of withdrawal.

This is why it’s important to make sure that you are able to lock your money away for the full term if you are looking at fixed rate accounts.

Fixed rate bonds offer some of the best returns on the market and it is a competitive area, so it's important to keep an eye on the best buy tables on a regular basis, as things can change quickly and the top rates do not always last for long.

Visit our website to see our fixed rate bond best buy tables

Call us free on 0800 011 9705 with your savings query14 15

Regular savings accounts Fixed rate accounts

It’s great to get children interested in saving as early as possible and there are a range of different types of children’s savings accounts available to suit most needs.

Some of the most common types are easy access accounts, regular savings accounts and fixed rate accounts. In addition, you can also choose a Junior ISA, which gives many younger children a tax-free account to save into. It is also worth noting that from the age of 16, children can invest into both a cash ISA and a Junior ISA, which is held until the age of 18.

The terms and conditions of children’s accounts vary widely, such as the age range that the account is available to and what degree of access is allowed to the money. In addition, many accounts will offer gifts, such as piggy banks and soft toys, but it’s important not to be drawn to an account simply because of the freebies. While it’s a good way to get children interested at the beginning, how the account works and the interest rate payable is far more important in the long run.

Children have their own personal allowance, so for the majority there will be no tax to pay on their savings interest. However, parents should be aware that there may be a tax liability to themselves on the interest earned on any money they gift to their children, until they reach the age of 18. This even applies to cash put into an adult ISA (adult ISAs can be opened from age 16).

However, if the gross interest earned is less than£100 for each parent’s gift, it will be treated as the child’s under the 'de minimis' rule. This means that provided the interest earned does not make the child a taxpayer, they will be able to offset this against their personal tax allowance, so it will often be free of tax.

If the interest is more than £100 for each parent’s gift, then it will be treated as that parent’s interest for tax purposes and therefore they may need to pay tax at their marginal rate - if it takes them above their Personal Allowance and/or Personal Savings Allowance.

Gifts from any other family members or friends will not be viewed in the same way. Instead, any interest earned will be treated as belonging to the child themselves and therefore can be earned tax-free if they are non-taxpayers.

Previously, an R85 form had to be completed by a parent or guardian to allow the interest to be credited to the account without any tax being deducted.

However, since the introduction of the Personal Savings Allowance in April 2016, all interest is paid without tax taken off by banks and building societies, meaning that the R85 form is no longer needed.

So, children’s accounts are a great place for parents to put money aside regularly for their child’s future, particularly if you take advantage of one of a number of regular savings accounts on the market, which often provide higher returns than a standard account. There are also plenty of options available for lump sum deposits.

In addition, for older children, encouraging them to put money aside in a savings account is a great way of getting them into the savings habit - setting them up well for the future.

Visit our website for our children's account best buy table.

Call us free on 0800 011 9705 with your savings query16 17

Children’s accounts Junior ISAs

As mentioned earlier, a Junior ISA is a type of tax-free savings account which is opened on behalf of a child. Accounts can be topped up by parents, friends and family up to a limit of £4,260 in the current tax year (rising to £4,368 in the 2019/20 tax year). Like adult ISAs, Junior ISAs are available in both cash and stocks and shares varieties.

Junior ISAs were originally available to children born on or after 3 January 2011, born before September 2002 or those that didn't qualify for a Child Trust Fund account. However, since April 2015 anyone with a Child Trust Fund could transfer it to a Junior ISA as well.

Junior ISAs were introduced in November 2011, replacing Child Trust Funds. This meant that some children were stuck in these accounts, whilst providers focused their attention (and rates) on the newer Junior ISAs.

Luckily, the change in rules in April 2015 meant that those holding a Child Trust Fund can now choose to transfer it to a Junior ISA, meaning that they do not miss out on some of the higher returns available.

Junior ISAs are opened by a parent or legal guardian on behalf of a child, with the money in the account belonging to the child, although it cannot be withdrawn until they turn 18.

Parents, friends and family can all contribute to the Junior ISA, as long as the total amount stays within the limit, so it can be a great way of building up funds for the future.

The main advantage of a Junior ISA over a standard children’s savings account is that parents can contribute to this account without falling foul of the tax rules that limit the interest on gifts from parents to less than £100 per year, per parent.

To clarify, if money given to a child by a parent outside a Junior ISA earns gross interest of more than £100 in any tax year, the parent is taxed on all the interest. At an interest rate of around 3%, a parent would fall foul of this rule on savings of around £3,300 and as the amount saved increases over time, it could have a significant impact going forward.

Visit our website for our Junior ISA best buy table.

Sharia compliant savings accounts are accounts that comply with Islamic law but are available to any saver, regardless of religion or culture. As Sharia law states that money itself had no intrinsic value, the payment and receipt of interest is forbidden. Instead, Sharia compliant accounts pay an 'Expected Profit Rate' as an alternative to interest, which is the level of profit paid by the provider to the saver.

Sharia compliant accounts have been part of the savings landscape for some time now, though it’s only in the last few years that their popularity appears to have grown amongst savers. There are a number of providers that offer this type of account, with Al Rayan Bank (formerly the Islamic Bank of Britain), Bank of London & the Middle East (BLME) and Gatehouse Bank, perhaps the most prominent names at the present time.

Whilst fixed term deposits are the most common type of Sharia compliant account, there are also easy access accounts, notice accounts and both variable rate and fixed term cash ISAs available.

These accounts work broadly in the same way as the standard equivalents, though of course each pays an expected profit rate rather than interest.

Whilst the accounts are primarily designed for those people who would like to get a return on their savings without compromising their faith, they can be suitable for all savers.

However, because of the different way that the return is calculated and the element of risk that sets these accounts apart from standard savings accounts, you should ensure that you are comfortable with this before proceeding.

The provider invests the money deposited by savers to generate a profit, so there is an inherent risk involved, as the return received depends on the performance of the investments made. Having said that, providers are keen to state that expected profit rates are usually

achieved and most providers allow you to take funds away early if the expected profit rate is not likely to be achieved.

It is also worth noting that the risk involved is to the level of return only; the capital is no more at risk than in a standard savings account, provided of course you keep within the FSCS limits, as mentioned earlier.

Some of the rates on offer are higher than those offered on standard savings accounts, though the gap has reduced in recent times, as the accounts have increased in popularity.

It is important to make sure you are happy with how the expected profit rate is generated and paid and it is also worth looking at the provider's track record in achieving profit rates in the past. Always ensure that providers are covered by the FSCS or equivalent and if you have any concerns, keep within the protection limits.

We have a best buy table that is dedicated solely to Sharia fixed term accounts, with a selection of the top-paying accounts.

Visit our website for our Sharia Fixed Term Accounts best buy table.

NS&I is a savings institution that is backed by the Government and is therefore often considered by savers to be the most secure provider of the lot. As a result, the interestrates offered are rarely the best on the market.

Many of the accounts offered are similar to those available from other savings providers, but there are some differences.

Premium Bonds are an old favourite - but more of a lottery than a savings account. However, unlike the lottery you won’t lose your original capital and you might just win a big prize.

Index Linked Savings Certificates can be useful, especially for taxpayers, as they will pay a rate equivalent to the Retail Price Index (RPI), plus a little extra, over either two, three or five years. As the returns from these are tax free, you can be sure that the effects of inflation on your money will be reduced.

It is worth noting that from May 2019, the measure of inflation used to calculate the return changes to the Consumer Prices Index (CPI) for any maturing accounts.

These accounts are not currently available to open, but those already holding a previous version are able to continue after maturity.

However, this decision is not always straightforward, as savers will need to compare the return available against the rest of the market, whilst remembering that you may not be able to open one in the future, if you do not take up the offer.

Perhaps the most interesting development from NS&I in recent years was the launch of the 65+ Guaranteed Growth Bonds, often referred to as ‘Pensioner Bonds’ in the media.

Available for either one or three years, the rates on offer were far in excess of the competition at the time. Each saver over 65 could put up to£10,000 into each term and the accounts proved extremely popular.

Unfortunately, the options on offer from NS&I on maturity were disappointing in comparison to the original rates and so many other providers will have seen an influx of funds, as these accounts matured.

In a similar vein, 2017 saw the release of a new 3 year Investment Guaranteed Growth Bond from NS&I. Like the so-called Pensioner Bonds before it, this new bond was set to be a market-leading interest rate and designed to help savers who continue to struggle with low interest rates.

Unlike Pensioner Bonds, this bond could be opened by anyone over the age of 16, so had far more of a reach and was available to open for 12 months from launch.

Unfortunately, whilst the rate was ahead of the competition at launch, the reception was fairly muted overall, thanks largely to the relatively low maximum balance of £3,000.

NS&I remains a popular choice for savers due to the fact that all money placed with the provider is protected. However, due to the advantage that this gives NS&I over the rest of the market, we have often found that the provider has to stem the inflow of funds by making its rates less attractive. As a result, we have seen a number of cuts to its rates over the last few years, affecting both new and existing account holders.

In many cases better rates can be found elsewhere and provided you keep within the Financial Services Compensation Scheme (FSCS) limits, your money is still protected, should the chosen provider fail.

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Sharia compliant savings accounts National savings & Investments

There are also cash ISAs that limit the number of withdrawals you can make in a year and if you fall foul of the rules, a much lower interest rate then typically applies for the rest of that year.

As always, make sure you carefully study the terms and conditions of the ISA before going ahead and if you go for one of these accounts, plan your withdrawals carefully or ensure that you know when your bonus ends.

As mentioned earlier, Rate Tracker can help you with this by sending you a reminder when your bonus ends.

Notice ISAs again work in pretty much the same way as a standard notice account and can generally offer you higher returns in exchange for restricting access to your money.

For those happy to sacrifice easy access to their money and are able to plan withdrawals carefully, notice ISAs can work well. Notice periods can vary between accounts and are not always a better option in terms of interest rate than some easy access ISAs, so make sure you look at a selection of different types of account before taking the plunge.

For a selection of the best-paying easy access and notice ISAs on the market, please refer to our Variable rate cash ISA best buy table.

Fixed Rate Cash ISAs

Fixed rate cash ISAs are similar to standard fixed rate bonds in many ways, offering a fixed return for a fixed term.

One of the main differences between fixed rate cash ISAs and fixed rate bonds is that some form of access to your funds has to be offered with a cash ISA, whereas often you cannot access your money at all with a fixed rate bond.

To access a fixed rate cash ISA, there is usually a hefty penalty involved, so whilst the facility is there, it is still advisable to make sure you can tie funds up for the term before proceeding.

The term usually ranges between one and five years and, generally speaking, the longer you tie into a fixed rate, the higher the return you receive.

Obviously, this is not always the case, with rates varying wildly between providers, so make sure you look at the top rates available from the whole of the market before going ahead.

For the latest rates take a look at ourFixed rate cash ISA best buy tables or call us on

The bonus can only be used for one of the two goals at the present time, but it does allow people already on the property ladder to benefit from that Government incentive.

You are able to save up to £4,000 per year in a Lifetime ISA and the Government bonus is added to the account on a monthly basis.

Lifetime ISAs can be either stocks and shares or cash ISAs, although there is very little in the way of choice amongst cash ISAs at the time of writing. Hopefully, this will pick up soon and there will be more competition in the market, but watch this space and we will bring you developments as and when we get them.

For more detail on Lifetime ISAs, download our factsheet or for those looking to compare the new offering with a pension, we have produced a second factsheet to highlight the differences

between the two.

ISA Transfers

Of course, if you are not happy with the interest rate you are getting or would like to switch to a different type of ISA, this is where ISA transfers come in.

Transferring your ISA to another provider ensures that not only can you pick a more suitable option for you, but if the process is followed correctly, the money stays in the ISA wrapper and does not affect the current year’s ISA allowance.

Approach the provider you would like to transfer to and they will help you with the paperwork and request the transfer on your behalf.

Never take the money out of an ISA yourself with the intention of moving it elsewhere, as that money will no longer count as ISA money and will count towards your ISA allowance if you attempt to pay it in, something that will be impossible if you have already paid into an ISA already in that tax year.

If you need any help or guidance with an ISA transfer, please do not hesitate to get in touch with us on 0800 011 9705.

0800 011 9705.

Help to Buy ISAs

This type of cash ISA is designed to help first time buyers get onto the property ladder and have been around since December 2015.

First time buyers can save up to £200 per month (plus an additional £1,000 in the first month only), which then goes towards the purchase of their first home. In addition to the interest earned on the money held in the account, the Government adds a bonus of 25% of the balance when the purchase goes through, from a minimum of £400 up to £3,000.

The addition of the Government bonus is a good incentive for first time buyers to save regularly and whilst arguably the icing in the cake, there are some attractive interest rates on offer currently as well.

For more information on Help to Buy ISAs -download our free factsheet and for the latest rates, take a look at our Help to Buy ISA best buy table.

Lifetime ISAs

The latest addition to the ISA family is the Lifetime ISA, which works in a similar way to a Help to Buy ISA, but allows those under the age of 40 to not only save towards their first home, but could alternatively put money towards their retirement and benefit from a 25% Government bonus.

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Cash ISAsAn Individual Savings Account (ISA) is simply a tax free ‘wrapper’ offering you a tax break, so that you are sheltered from some or all of the tax on the investment. Every year, all UK residents aged 16 or over have an annual ISA allowance. For this tax year (2018/19), the total ISA allowance is £20,000. You can choose to put the whole allowance in a cash ISA, invest in a stocks and shares ISA, an Innovative Finance ISA, a Lifetime ISA or have any combination of the four types, up to the maximum allowance.

No tax is payable on the interest earned in a cash ISA, so if you’ve not used up your ISA allowance, you could be paying more tax than you need to. Even non-taxpayers should consider a cash ISA as, over time, the amount they build up in this tax-free wrapper could become considerable, yet, under current legislation, they’ll never need to pay tax on it, even if their circumstances change.

Like savings accounts in general, cash ISAs come in many shapes and sizes. They can offer easy access to your money, access by giving notice or they can be fixed term accounts. New types of cash ISA have been launched in the last few years, such as the Help to Buy ISA in December 2015 and most recently the Lifetime ISA, which was launched in April 2017.

For more information on cash ISAs, please contact our savings experts on 0800 011 9705 or download our free guide - Navigating the ISA Maze.

Variable Rate Cash ISAs

As the name suggests, these accounts are variable and come in two main varieties, easy access and notice ISAs.

Just like the standard equivalents, easy access ISAs allow you to get at your money without giving any notice or paying penalties.

However, whilst they are straightforward, just like their non-ISA counterparts, there are sometimes introductory bonuses to watch out for, where the interest rate drops like a stone after the initial period, which is typically 12 months.

Banks and building societies have become increasingly sophisticated over the years, introducing a range of ploys that make their accounts appear more competitive and elevate them to the best buy tables. For the canny saver, these features can be a great way of squeezing out as much interest as possible, but for others it can be an expensive trap. Below are some of the things to look out for.

Introductory bonuses

A number of the best accounts available include what is known as an introductory bonus and it’s important to understand just what this means. A more straightforward description would be that the account pays an enhanced rate of interest for a specific period of time, such as six or twelve months.

Bonuses have become less popular over the last few years with fewer examples among the top rates, but there are still a number of accounts that include them available on the market.

When your account includes a bonus, it’s essential to make a note of when it is due to end, so that you can find another competitive account to switch to.

Remember, banks and building societies are counting on you to not move your funds and remain on the lower rate for as long as possible. You can call their bluff by doing the opposite, ensuring that you earn as much interest as possible on your funds.

Our free Rate Tracker service is a great way to keep an eye on the rate you are receiving. We will remind you when the bonus ends and also let you know the best rates available at that time to switch to.

So, whilst on the face of it bonuses can be seen as a negative, enticing savers in and then paying a lower rate after an initial period, if savers are on the ball, they can use them effectively to get a better return on their funds.

Restricted withdrawals

Another ploy is to offer an easy access accountthat will actually penalise you if you try to accessyour money too often. For example, the providermay offer a very competitive interest rate, but theaccount allows only a limited number ofwithdrawals over 12 months.

If more withdrawals than stipulated are made, therate will often drop dramatically, usually to anuncompetitive level. Lower rates tend to thenapply for the rest of the year before the number ofwithdrawals are ‘reset’, though there are someaccounts where interest is paid monthly and youget the lower rate or even no interest in anymonth when a withdrawal is made.

Whilst it is more common to impose a temporarylower rate period, in some cases the account willbe closed or no further access to the moneygranted, so it is very important to check the termsand conditions of the individual accounts.

Therefore, these accounts are only reallyappropriate for those who don’t need access totheir funds very frequently. The accounts can be agood way to get a higher return than somealternatives and as long as you are clear on theterms and conditions and are able to planwithdrawals carefully, they could still beconsidered as part of a balanced savings portfolio.

Lower rates on lower amounts

This may sound obvious but some accounts pay higher interest rates the more you have in the account, which is great for those with larger amounts to invest.

However, the reverse is also true, so making a withdrawal can lower the rate paid on your funds.

Again, it is a case of being aware of the terms and conditions of the account, being clear where the interest rate thresholds are and planning withdrawals around this.

Our Rate Tracker service will keep you informed about the interest rate applicable on your account, so you can react accordingly. If by adjusting your balance, your rate falls, Rate Tracker will let you know.

There may be alternative places to take your funds from to maintain your higher rate and your Rate Tracker Portfolio will allow you to look at this at a glance.

Lower rates on higher amounts

Occasionally the rate of interest on an account will actually fall if the cash invested is higher than a certain amount, so again it’s important to be vigilant when opening an account.

Check the rate that you will earn on the amount you deposit and that you can add to it without detrimentally affecting the interest rate.

Some accounts may involve a combination of these tricks, so check the information on our best buy tables and read the terms and conditions carefully before proceeding.

If you are unsure about any aspect of an account, give us a call on

0800 011 9705 and one of our savings experts will be happy to help

Call us free on 0800 011 9705 with your savings query22 23

Tricks of the trade

With the exception of cash ISAs, savings accounts previously were taxed at source, using the basic rate of tax. What this means is that the 20 per cent basic rate of tax was deducted before the interest was paid out.

However, from April 2016, the taxation of savings interest was fundamentally changed with the introduction of the Personal Savings Allowance (PSA).

The PSA is essentially a tax-free allowance that all basic and higher rate taxpayers are entitled to.A basic rate taxpayer can earn up to£1,000 in savings interest before paying tax, whilst higher rate taxpayers have a lower allowance of £500.

It is worth noting that additional rate taxpayers receive no PSA and therefore will pay tax on all savings interest, barring that earned on cash ISAs.

In fact, for all savers, interest earned on cash ISAs does not count against your PSA amount, so cash ISAs remain an effective tax-free savings vehicle for all, but particularly those who earn more interest than the PSA that is applicable to them (if at all).

If you earn more interest than the PSA applicable to you, tax will have to be paid at the rate applicable to your tax band and this will be collected by HMRC through the PAYE system or through a self-assessment, if you already complete one.

It is also worth noting that if your income for the year falls into a higher tax bracket, even by the smallest of amounts, the amount of PSA applicable will drop by £500 for those moving into the higher rate bracket or to zero, if you then become an additional rate taxpayer.

Call us free on 0800 011 9705 with your savings query

We're here to help you choose the right savings account and to answer

any other questions you may have about savings.

So, please feel free to email us at info@savingschampion.co.ukor call our savings experts on

0800 011 9705

The advent of the PSA is obviously great news for savers, with more people earning tax-free interest on their savings pots than before, but some commentators have suggested that this could lead to the death of the cash ISA.

However, it is worth remembering that with the PSA, the amount of savings you can earn tax-free interest on, depends on the interest rate that is paid at that time.

When interest rates go up, the balance needed to go above the PSA goes down, whereas money held in a cash ISA remains tax free regardless of the balance and interest rate.

The PSA may also be vulnerable to future changes of Government and policy, whereas there is less likelihood of a change in cash ISA rules – certainly when it comes to cash ISAs that are already held.

Taxation as a whole is a complex subject and this information is for guidance only. If you are unsure you should always check with a tax expert.

The information provided is for guidance only and based on

our current understanding of HMRC practice and therefore

does not constitute personalised advice.

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Taxation of savings accounts

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Telephone: 0800 011 9705

email: info@savingschampion.co.uk

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