A lacklustre Isa season will leave savers having to work extra hard in the coming weeks to seek out the best deals, experts have warned.
Those who want to make the most of their new annual tax-free cash Isa allowance of £5,760 from April 6 will struggle to find anything which beats the eroding effects of inflation.
Financial information website Moneyfacts said that the top fixed-rate Isa deal on the market at the moment has a rate of 3.1% and is being offered by the Halifax, but savers need to be prepared to lock their cash away for five years to get this product. A year ago, people could have got an easy access Isa deal which would have beaten this rate.
Returns on savings have been driven down by four years of ultra-low interest rates, but analysts say the situation has been made worse in recent months because lenders have been less reliant on attracting savers’ deposits following the launch of a Government scheme to help borrowers.
The Funding for Lending scheme was launched in August and gives lenders access to cheap finance. Isa seasons traditionally see a flurry of activity, during which providers up the ante on their best deals as savers decide which Isa (individual savings account) they are going to invest in as the new tax year approaches.
The annual Isa allowance is non-transferable, which means that if a saver does not use it up in one tax year it cannot be carried over.
Moneyfacts spokeswoman Rachel Springall said: “There has not been the battle that we have seen in previous Isa seasons. We have seen some launches but it is not as competitive.
“Normally at this time of year providers would be upping their bonuses. That’s not something we have really seen this year at all.”
According to Moneyfacts’ “best buy” tables, the top easy access cash Isa is a deal at 2.8% from the Coventry Building Society. This matches the current rate of inflation. This time last year, the top rate on a similar deal would have been 3.5%.
The possibility of the Funding for Lending scheme being extended has been raised, which would spell further bad news for savers.
In a further blow to those searching for better returns, Treasury-backed savings provider NS&I announced that it would not be offering its inflation-busting index-linked savings certificates until April next year at the earliest.
NS&I had to withdraw index-linked savings certificates for new customers in 2011 after a flurry of savers looking to take them out meant their popularity put it in danger of breaching its targets.