Where is the best place to get cash Isa? If that question had been asked five years ago, the answer would have involved looking away from the big boys and focusing on the smaller banking and building society players and some of the new digital challenger banks.
But there has been a bit of a shake-up over the last year and if someone asked me now I would say check out the new generation of cash Isas offered by investment platforms and apps.
The top spots on This is Money’s best cash Isa tables have increasingly featured names such as Plum, Moneybox, Trading 212 and Chip in recent times.
Our fixed rate tables continue to be dominated by traditional banks and building societies, but when it comes to easy-to-access cash Isas, these investment apps have staked their claim with blockbuster rates.
If you’re happy to open and manage a cash Isa on your phone, as most of our readers will be, then these offers are worth considering.
They are all proper cash Isas (not investment shares or share Isas that pay interest on cash balances) and have FSCS protection up to £85,000 per individual.
Are you looking for the best Isa? Consider ditching the banks and building societies for one of the flexible offerings offered by investment platforms.
Another name more associated with the world of the stock market landed a major deal last week, as CMC Invest* Isa launched a cash payment paying 4.85 percent.
This is located behind Exchanging 212* 4.9 per cent cash Isa and ahead French fries* 4.58 percent agreement.
They are all surpassed in speed by the two tabletops, Plum* at 5.18 percent and Piggy bank at 5.17 percent.
However, I would opt for one of the lower fees instead of Plum or Moneybox as they come with strict restrictions on withdrawals.
Plum’s rate drops to 2.5 percent after four withdrawals, while Moneybox’s drops to 0.75 percent.
Some savers may be okay with that and won’t make enough withdrawals to be affected.
But for me, the real value of an easily accessible cash Isa lies in combining its tax-beating potential with the fact that it is a home for your everyday savings.
This is the fund you may need to dip into to pay big bills, make big purchases, finance vacations, or do all those other expensive things that come up, and for me that’s always more than four times over the course of a year.
Why you need a flexible Isa
Many of us make the mistake of only using Isas for long-term funds and keeping large amounts of cash easily accessible in standard accounts.
Inevitably, that will also mean losing money due to the savings tax.
Keep your money in an easy-to-access cash Isa and you’ll be safe from tax, and this benefit can be boosted by choosing a flexible Isa.
Flexible Isas allow you to withdraw cash and, as long as you pay it back during the same tax year, you won’t lose any of your £20,000 annual allowance.
I’ve written about this before and you can find out in more detail here why I think a Flexible Cash Isa is an essential component of managing your money.
Flexible Isas have been around for quite some time, but not all banks and building societies offer them.
However, the feature has become important to this new cohort and Trading 212, Chip and now CMC Invest offer flexible Isas that accept transfers.
So what’s the reason behind this spate of great cash Isa deals?
If you’re being generous it’s because these cash Isas have been designed from the ground up by new providers trying to create products with the best features available.
But obviously there is also a more calculated reason. This is because there is a huge demand for good savings products and offering cash Isa at the best rate is a quick way to get new customers and lots of funds.
The platforms can then market their investment offerings to those customers, having overcome the significant hurdle of getting them through the door.
If rates fall, savers may jump ship, but a considerable number will stay as long as profitability remains reasonable and service decent.
Obviously, I’d recommend shopping around for the best rate whenever you can, so if you open one of these accounts, keep an eye on the rates and move if necessary; Remember to always check FSCS protection before signing up.
But it’s certainly worth considering these new cash Isa players first, especially as since last April you’ve been allowed to pay new money into multiple Isas of the same type each year.
> See our roundup of the five best cash Isas
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