Why you should consider abandoning your cash Isa

Standard savings accounts are paying better rates than their tax-free cash Isa counterparts, says Ruth Jackson-Kirby.

Flowerpots with investment labels
Isas are good for investments but their advantage for cash has shrunk
(Image credit: © Getty Images)

Individual savings accounts (Isas) might seem like an obvious place to store your savings. However, interest rates on these accounts lag far behind standard savings products. Banks are paying as much as six times more interest on their standard savings accounts than their tax-free Isa equivalents, according to financial-comparison service Moneyfacts. The top rate for a one-year fixed-rate account is 2.4%, compared with 1.86% for the equivalent Isa.

Moneyfacts found that 57% of one-year fixed rate cash Isas pay less than the same non-Isa accounts, and a further 34% paid the same rate. Only 9% paid higher rates on Isas.

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Ruth Jackson-Kirby

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping, among many other titles both online and offline.