Trading 212 increases its ISA rate, making it the best tax-free buy

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Savings rates have plummeted since the Bank of England cut the base rate to 5 percent in August.

And now that the Bank of England has kept it at 5 percent today, savings experts predict rates are more likely to fall than rise.

But the silver lining is that savers can still find top savings rates that easily beat inflation of 2.2 percent.

Trading and investment platform Trading 212 has bucked the trend this week of providers cutting rates by raising their Easy access cash Isa* agreement at 5.1 percent.

Even before the increase, it was paying a market-leading rate of 5 percent.

Trading 212 launched its Cash ISA in May for new and existing clients.

When it launched, it paid a top rate of 5.2 percent, the highest rate available for an easily accessible tax-free account.

Earlier this month, the rate dropped to 5 per cent for new and existing customers. But despite this, it remains the highest cash ISA rate on the market and now beats the rest by a considerable margin.

That beats Plum Cash, Isa which pays 4.92 percent and Chip Flexible Tax Free ISA* which pays 4.84 percent.

The average easy-access ISA pays a rate of 3.27 per cent according to rates tracker Moneyfacts Compare.

Trading 212 Cash Isa* It is a flexible ISA, which means you can take money out of the ISA and replace it without affecting your ISA allowance, as long as you replace it within the same tax year.

Flexibility can be a useful tool in an ISA to ensure you keep as much of your savings tax-free as possible.

The ISA can only be opened in the Trading 212 app with a deposit starting from £1.

Are you protected by FSCS?

Trading 212 says on its website that any money held in a cash ISA will be protected under the Financial Services Compensation Scheme up to £85,000.

FSCS protects clients’ money up to £85,000 in the event of a firm going bust.

Trading 212 Isa funds are held in linked bank accounts at Barclays, NatWest and JPMorgan.

Trading 212 is an FCA regulated company and an HMRC registered ISA manager, so it can offer a cash ISA to savers despite being an investment app and not having a banking license.

It is not unusual for companies other than banks or building societies to use other institutions to obtain FSCS, but using three different banks is not common.

Previously, clients were unable to see which of the three banks their money would be held in for FSCS protection, but Trading 212 has changed this and clients can now see the percentage of their cash held in each bank that is in interest in the cash tab in the Trading 212 app.

This means that if you already have money in Barclays, NatWest or JPMorgan, you will need to be careful not to exceed the £85,000 limit if you store money with Trading 212.

How does it compare to other major ISA offerings?

Chip

Chip Flexible Cash ISA* It is the second best easy-access cash ISA on the market after Trading 212, which pays a rate of 4.84 per cent.

Like the Trading 212 Cash ISA, it is a flexible ISA and offers a competitive rate for clients who want to move in and out of their fund without using up their ISA allowance in the process.

There are no limits on the number of times you can withdraw your money and Chip will not reduce your interest rate for accessing your money.

The current base interest rate of 5% is 0.26% below the current base interest rate of 5%. Previously, this account paid 5.1%, when the base interest rate was 5.25%.

When the base rate goes up or down, your savings rate will move on the same day.

This account can only be opened by downloading the Chip app. The minimum deposit required to open an account is £1.

Any money deposited into the Chip settlement is held by Clear Bank and is eligible for Financial Services Compensation Scheme protection of up to £85,000 per person.

Plum

Plum Cash Isa* pays 4.84 percent but includes a bonus rate of 0.88 for the first 12 months.

If your balance falls below £100 or you make more than three withdrawals in a year, the rate is reduced to 3 per cent.

The other drawback of the Plum account is that it isn’t flexible. Flexible ISAs are a great tool for saving and avoiding tax, as they allow you to use some of your money and, as long as you pay it back in during the same tax year, it won’t lose its tax-free status or eat into that year’s ISA allowance.

This account can only be opened through the Plum app with a minimum deposit of £100. All cash deposited is fully protected by CitiBank’s FSCS.

Cynergy Bank

Cynergy Bank Cash Isa Paying a rate of 4.82 per cent, this is the best cash savings ISA savers will find and it doesn’t require downloading an app.

It can be opened online on the Cynergy Bank website with a minimum of £1 and allows transfers from another provider. However, it is not a flexible ISA.

All money deposited is eligible for protection under the Financial Services Compensation Scheme of up to £85,000 per person.

Who is Trading 212?

Trading 212 is an investment and trading app founded in 2004. It offers low-cost trading and investing. It is free to have a cash ISA account with Trading 212.

It’s the latest in a series of low-cost investing and trading apps offering a cash ISA that pays an excellent rate.

To get the rate, customers need to tap the ‘earn cash interest’ feature on the app.