Long-suffering savers are likely to be all too familiar with the current state of the savings market, and while Individual Savings Accounts (ISAs) were once a competitive safe haven for savers’ cash, the last four years of rate cuts have been excruciatingly painful.

Indeed, research from Moneyfacts.co.uk can reveal that average rates, and in some cases best buy deals, have halved since the Funding for Lending Scheme (FLS) launched in 2012. In addition, since the introduction of the Personal Savings Allowance in April 2016, ISA rates have continued to plummet.

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“It’s clear that the FLS has had a huge impact on the savings market over the last four years, but tax efficient initiatives launched by the Government may also have also resulted in ISA interest falling to record lows.

“Before the FLS launched savers could get an easy access ISA paying 3.30%, but now the best deal on the market pays just 1.30%. The same decline can be seen in the longer-term fixed rate market - in 2012 the best five-year ISA paid 4.25% whereas today it pays a miserly 2.05%. The downward rate spiral can also be clearly seen in terms of the overall average rate - it now stands at just 1.17% compared with 2.55% in 2012, which illustrates how far the market has fallen.

“Since the Personal Savings Allowance (PSA) launched in April, we have seen significant cuts across ISAs, with some providers offering better deals on their taxable accounts than their ISA counterparts. It’s therefore fair to assume that this new allowance has reduced the appeal of ISAs, and has subsequently reduced their competitiveness yet further.

“As savers digest the Brexit result they will no doubt be concerned about the performance of their investments and they may well turn to investment in cash. Fortunately around 70% of all cash ISAs accept transfers in from stocks & shares ISAs, and with the ISA limit expected to rise to £20,000 next year, cash ISAs may become a popular haven.

“However, if providers are swamped with new money too quickly then the best buy deals could well be withdrawn from the market. Therefore, anyone looking to invest in a cash ISA may be wise to consider doing so while there are still some decent deals left to choose from.”

www.moneyfacts.co.uk - The Money Search Engine

Moneyfacts.co.uk is the UK's leading independent provider of personal finance information. For the last 20 years, Moneyfacts' information has been the key driver behind many personal finance decisions, from the Treasury to the high street.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.