If you still need to make use of your £20,000 ISA allowance for the current tax year, Hargreaves Lansdown (HL) is boosting its cash ISA offering on its platform with £25 cashback - but is it enough to beat the leading ISA on the market right now?
HL became the first investment platform to launch cash ISAs on its Active Savings platform on 1 February, ahead of the new ISA rules taking effect on 6 April that will let savers take advantage of multiple ISAs of the same type within the same tax year.
Since its launch, it has accumulated 46,000 cash ISA savers on its platform.
Start your trial of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
While cash ISAs haven’t always been the preferred savings choice over the past decade due to their poor rates and the fact traditional savings accounts often pay more than ISAs, they have improved significantly as a result of high interest rates.
Latest Videos FromMoneyWeek
Currently, you can earn nearly 5.2% on a cash ISA, with the gap between an easy-access ISA and a traditional easy-access savings account only standing at 0.3%.
If you’re worried about paying tax on your savings, a cash ISA is a good option as the tax wrapper will protect your interest from the taxman, meaning you can keep every penny.
Find out how to claim the £25 cashback on HL’s cash ISAs, how the rates compare, and how to open an account.
£25 cashback with Hargreaves Lansdown on cash ISAs
HL hosts a variety of cash ISA providers on its Active Savings platform, with the top product currently offering 5.03% AER with Charter Savings Bank.
If you opt for this highest-paying cash ISA on its platform, pay in £10,000, and take advantage of its £25 booster, HL claims it will give you an effective return of 5.28% AER.
Mark Hicks, head of Active Savings, Hargreaves Lansdown, said: “With this cashback offer, the HL Cash ISA offers the top rate in the market for anyone looking to deposit between £10,000 to £20,000 into their ISA.”
So, you will need to pay a minimum of £10,000 into the Charter Savings Bank cash ISA via the Active Savings platform to qualify for the £25 bonus.
But, if you deposit your full ISA allowance of £20,000 into this account, the rate you earn will drop to 5.15% AER. In this case, you will still get the £25 cashback, but it won’t equal an effective 5.28% AER.
New and existing HL customers who do not currently hold a cash ISA are eligible to open a cash ISA on the Active Savings platform. To get the £25 cashback, you must open the ISA through the HL platform by 25 April.
Along with the cash ISA, you will need to open a traditional savings account on the Active Savings platform, as the £25 bonus will be paid to this account on 24 October. You can opt for either an easy-access or fixed savings account, currently returning up to 5.12% AER.
Any cash up to £85,000 held on HL’s savings platform is protected by the Financial Services Compensation Scheme (FSCS).
How does it compare to the rest of the ISA market?
In the wider ISA market, right now you can earn up to 5.17% AER with Plum, which hiked its rate today (26 March) from 5.15%.
In comparison, HL’s £25 cashback boosts the Charter Savings Bank’s cash ISA offering on its platform to a market-leading 5.28% - making it 0.11 points higher than Plum.
But, without the £25 cashback, there are other decent rates available from other providers , as competition is heating up before the end of the tax year. For example, Moneybox is currently offering 5.16% AER, which is up from 5.11%.
Also, if you’re looking for a true easy-access ISA that offers flexibility, Plum or Moneybox offer this, permitting up to three withdrawals per year without it affecting your ISA status. And the Chip ISA offering 5.1% allows you to withdraw your savings when you like.
This compares to the Charter Savings Bank ISA held on the HL platform, which says you will lose your ISA status on any cash you withdraw, and you can’t put it back into your ISA.
The £25 cashback offer also beats fixed ISAs, as the top product returns 5.25% by Virgin Money - 0.03% less than what you would get with HL. The next best fixed ISA rates plummet to 5.07% by OakNorth and Kent Reliance.
HL’s Active Savings platform, which launched back in 2018, hosts traditional savings accounts and cash ISAs. It is the only investment provider to offer cash ISAs.
Currently, it has 16 savings providers and six cash ISA providers you can choose from. The idea is that from the new tax year, when the ISA flexibility rules kick in, it will become a pick and mix for savers to take advantage of multiple cash ISAs.
Until 6 April, you can only hold one cash ISA.
You might notice that the rates offered on the platform are lower than what’s on the rest of the market. That’s because its rates are not based on the whole market, but its partner banks.
To open any savings or ISA account on the platform, you will need to open an Active Savings account online and add your cash to its ‘holding account’. From here, you can make deposits to any of its savings products on the platform.
You should note though that there is not one minimum deposit that applies to all savings accounts on its platforms. The individual accounts still have their own features, so you should check how much you need to pay in, any withdrawal restrictions - and if you’re opting for a cash ISA, you should check if it allows transfers in and whether it offers flexibility to withdraw cash and pay it back in without using up your allowance.
