Savers have been warned to treat ISAs in the same way they treat car insurance, and have been advised to shop around year after year to take advantage of introductory rates.
Moneyfacts have advised that many ISAs have introductory rates which only run for a year, and like car insurance, customers were get a better deal by becoming someone’s new customer.
An Office of Fair Trading report suggests that just 1 in 10 of UK savers are currently switching each year, suggesting that hundreds of pounds of savings could be had for all.
The ISA has been around for 12 years now and offers tax free savings, and it’s estimated that 17.5million people hold around £143billion in ISAs between them in this country.
The annual ISA limit is also set to increase in April to £10.680, with half of that allowed in a cash ISA.
Moneyfacts are urging savers to check both the introductory, and the subsequent interest rates when opening an ISA account, or transferring their existing money there, and have been advised to move after a year if the subsequent rate is poor.
“Interest paid in the second or subsequent year of an Isa that had an introductory bonus can be a very sad imitation of the original attention grabbing rate because, without the bonus element to prop it up, the remaining rate paid can be very low,” said Moneyfacts spokeswoman Sylvia Waycot.
“Pitfalls to watch out for are long-standing account names, as they will be issue-based and each issue will pay a different rate. The older the account generally means the worse the rate.”