The bankers at Virgin Money screw savers out of tax relief- and are proud of it?
Here at the cutting* edge of consumer journalism, we often get press releases from people who think they have something worthy of the attention of Bitterwallet readers. Because we know you so well, most of these missives end up in the trash folder, but some of them? Some of them are crying out for the ridicule and vitriol only Bitterwallet can spray with such gay abandon.
Virgin Money have got a shiny new idea to promote. They have come up with a brilliant new concept and they can’t wait for foolish journalists to tell you all about it. It’s a Pre-ISA ISA called the Early Bird ISA, and the point of it is that you can give Virgin Money your hard earned pennies before the new tax year starts on 6 April, and they will give you the interest as if you have invested in your ISA earlier. Of course, you can’t actually invest in your ISA any earlier, so the interest between now and 6 April will be subject to 20% tax deduction at source, same as for most other savings accounts, but that’s OK too. Richie has thought of that. The Pre-ISA ISA interest rate is actually 3.57% gross, which, after deduction of basic rate tax, brings the net interest rate down to 2.85%, which is the same rate they are offering on their Cash ISA. Sound brilliant to you too?
Unfortunately, Branson and his cronies appear to be too stupid to realise that the whole idea of Cash ISAs is so that conscientious UK savers can put some money away and earn some proper interest without having to pay income tax. It is not supposed to be a clever wheeze by which banks can offer ever decreasing rates of interest on ISAs, meaning that, effectively, the bank is pocketing the tax relief through paying lower rates, instead of the saver. If Virgin Money can offer a 3.57% savings rate, then surely that rate should also be available to ISA savers.
Far from being something to shout about, this blatant example of why the operation of the ISA system is fundamentally flawed should be something hidden under the bank’s carpet- after all, you don’t see proper other banks highlighting the fact that you can get better rates outside the tax free ISA wrapper now do you?
And the timing is absolutely definitely in no way meant to tie people’s money in to a Virgin Money account before the Cash ISA rate war really kicks off in March. As it is, moneyfacts.co.uk figures show there are already nine Cash ISAs offering a better rate, although some have a notice period, so it is likely Virgin Money will be way down the list come April.
So it’s up to you. Perhaps we are being cynical and hard on the guy who just bought a bank for (relative) peanuts, or perhaps he isn’t the one with all the £billions for nothing.