Deadline Sunday: Choose your ISA in 5 minutes by your personality
The end of the tax year is on April 5, so as a last minute reminder to help you stash some cash away from the stalky taxmen, here are some thoughts.
First, with the deadline fast approaching, and April 5 landing on a Sunday this year, you should start acting now. The smart bunch of you have probably already got an ISA sorted by now, but for the last minute few like myself, hunting for the best ISA in a sea of options can seem daunting.
With most guides (such as the MSE guide on Best Cash ISAs) focused on giving a list of numbers and rates and terms, by the end of reading them, you may find yourself still left with 8 different confusing options only to close the window saying that one of these days you'll get around to it.
For those that don't know what an ISA does, this nifty diagram from our friends over at MSE sums up the concept in a chocolate cake):
But as comedian George Carlin once said, "what good is a cake you can't eat?" Cash ISAs may be analogous in a similar way, as cash withdrawn from your ISA can't be 'replaced', meaning that if you withdraw part of the £3,600 you take out, you won't be able to make a further deposit until the next tax year. This is often a decisive factor for choosing whether to deposit money into an ISA in the first instant.
But what I realised from reading over a few guides was that by if you focus less on the interest rates and terms and definitions but more on your own personality and saving behaviour patterns, you can half your options in less than 5 minutes. The reason? Assessing your 'saving personality profile' should be a first priority, because we all approach money differently.
As an example, here are 3 "saving personality profiles". It's not meant to be an exhaustive nor all inclusive list of personality types, but it should hopefully help you if you're still confused about what ISA you should go for:
Personality Profile 1: "Penny saved, penny earned"
Like to put money aside regularly into a piggy bank, and pretty good at staying organised and scheduled? Have a look regular saver ISAs then. They are a bit rare these days, but one worth looking at is the First Direct Regular Saver ISA. This is available to existing customers with the First Direct 1st Account, but if you move your current account over to First Direct, you'll also get a £100 switching bonus. The rate? A nice 7% for the next year on savings of £25 to £300 a month. However, the fixed rate period means you also won't be able to make withdrawals during that time, which means you have to time the 12 month period so that you don't end up locking yourself into the same provider for the next year (rules dictate that your annual cash ISA must remain with one provider per tax year).
On the other hand, certainty types that prefer to have money put away without fluctuations over the next year should also explore fixed rate cash ISA. Bear in mind, this also means that if the bank interest rates go up for some reason, you will be stuck at a lower return. According to money.co.uk, Leeds Building Society is paying 3.5% on its 5 Year Fixed Rate ISA (Issue 10). But this would require tying your money up for a longer period, with penalties on withdrawals for more than 25%, which will result in losing 180 days' interest.So if five years is too long, have a look at the 3.1% e-ISA from First Direct Cash.
Personality Profile 2: "Freeedom!"
If you're the type that likes to save, but also wants to access the cash should emergency strike, then an easy access cash ISA may be for you. If this is the case, have a look at the Barclays Golden ISA, paying a great rate of 3.61% AER, also includes a 1% bonus for a year. Remember that the rate is tax-free, meaning that it is equivalent after tax to a normal saving account giving a rate of 4.51% for a basic rate taxpayer, or 6% for a higher rate taxpayer. Also, NatWest Cash ISA Plus is paying 3.51%, but a NatWest current account or instant access savings account is needed first, unless you're already an existing customer. Advantage Gold or Advantage Private Account holders also get an extra bonus if they open a Cash ISA Plus before April 20th: a rate of 4.02% for the next 12 months.
Personality Profile 3: "I'm a hustler baby"
Are you a saavy player, and want to hack the highest possible rate from all accounts currently and from previous tax years? Then, have a look at transferrable ISAs such as the Natwest e-ISA. You do need to have over £10k in the account to get the 3.51% rate, but you still get 3.25% on transfers under £10,000. Do beware, not all ISAs are transferrable, and make sure you go over the actual procedure for transfers as it's not just simply withdrawing from your existing accounts (as this wold count as a new contribution).
Finally, remember the tax year ends in TWO days, on April 5. So get going if you want to make the most of your savings, and do share any further tips you got with other readers in the comments below.