It’s that rarest of sights: no, not sunshine and 20 degree weather in February, but a high street giant offering a best buy Isa.
Santander, which used to be one of the main providers battling for tax-free savers in what was traditionally known as Isa season between March and May, has made a rare foray into the independent This is Money savings tables.
It has boosted the rates on two of its Isa products, with one going to the top of the table and another nestling in the top three.
Best buy cash Isas have been thin on the ground via the high street in recent years – but is that about to change?
Its eIsa pays a top rate of 1.5 per cent, and its two-year fixed-rate pays 1.9 per cent.
Both can be opened with a minimum deposit of £500. The products used to pay 0.5 and 0.8 per cent, respectively.
However, both do come with a catch. Most notably, the top rates are only available to the bank’s 123 World and Select customers, those who aren’t will have to settle for rates of 1.1 and 1.3 per cent, respectively.
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Looking for a better savings rate? Check our independent best-buy tables
Additionally, after the first 12 months the eIsa matures and you’re transferred into an Isa saver paying a paltry 0.35 per cent.
However, that rate is still the same as Lloyds’ cash Isa and actually beats NatWest’s 0.25 per cent.
Cash Isa rates hit a two-year high last November, but Santander’s offers are newsworthy because the best buy tables have become increasingly dominated in the last few years by building societies and newcomers such as Shawbrook and Cynergy Bank.
Among the other top easy-access cash Isas are Oaknorth Bank’s offer, paying 1.44 per cent, Shawbrook Bank, paying 1.43 per cent and Sainsbury’s Bank, paying 1.41 per cent.
Those three all come without bonus rates.
When it comes to two-year fixed-rates, Charter Savings Bank pays the best offer with its 1.95 per cent Isa, Shawbrook Bank pays 1.91 per cent and Coventry Building Society pays 1.9 per cent, the same as Santander’s top offer.
Nationwide is the only other established high street bank to offer an easy access Isa that appears in our tables, its Flexclusive Isa is for Nationwide current account holders only and pays 1.1 per cent.
Anna Bowes of Savings Champion previously told This is Money that ‘a general malaise has spread across the savings market because of the continual low rates of interest available’, with big banks ‘using this to offer savers much lower rates than they can get elsewhere because of the feeling that ‘there is not much to be gained by switching’.’
Its data shows that last year, the best buy easy-access Isas were up more than 30 per cent since the start of 2018.
She added: ‘The fact that Santander has launched some competitive cash Isas is a good indication that the Isa season is in full swing, whatever that might mean these days. Plus NS&I has upped the rate on its Direct Isa, although this is still a poor option.
‘These accounts from Santander are competitive, albeit only available to 1|2|3 Santander customers – and hopefully we’ll see some more competition in the weeks to come as a result.
‘The fixed-rate cash Isa picture is not quite as rosy – and the best buy fixed-rate cash Isas still lag behind the non tax-free equivalents, but by less than they have in the past.’
What was Isa season?
Traditionally, banks and building societies would scramble ahead of the end of the tax year to battle for cash – and then launch a raft of new deals in the next financial year, meaning higher rates.
However, a cash Isa season has failed to materialise in recent years, mainly thanks to Funding for Lending launching in 2012 pumping cheap cash to banks.
Isa rates have crumbled even faster than non tax-free offerings while the new personal savings allowance came into play in April 2016 upstaged Isas somewhat.
The PSA means £1,000 of interest is tax-free on savings each year for basic-rate taxpayers and a slimmer £500 for higher-rate taxpayers.
For many, this has removed the primary benefit of cash Isas, as they will not earn enough interest to trigger tax – and savers have simply looked to savings accounts with better rates.