Published On: Mon, Feb 5th, 2024
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Chip launches new Cash ISA paying ‘highly competitive’ interest rate | Personal Finance | Finance

Wealth and app Chip has launched its first Cash to help customers maximise potential returns amid higher .

The new account, powered by ClearBank, is fully flexible, allowing savers to instantly deposit and withdraw their money with no restrictions without affecting their ISA allowance.

It offers a “highly competitive” interest rate of 4.75 percent AER (variable) that tracks at 0.6 percent below the Bank of England’s Base Rate. Chip said this means it should stay automatically competitive and align with the broader market.

Chip said it prioritised developing a Cash ISA to help members keep more of the interest they earn as they grow their wealth.

Rising interest rates have increased the amount of interest received on savings, but also increased the likelihood of having to pay more tax on savings interest due to frozen personal allowances.

With a Cash ISA, all interest earned on money held within the account – up to the annual ISA allowance of £20,000 – will be tax-free.

Simon Rabin, CEO of Chip, commented: “This is a big moment for Chip and is the next step in our mission to become a trusted, one-stop destination for building wealth.

“Rising interest rates have changed the landscape so our priority was to develop a product to give our users a tax-efficient way to get the most out of their money, with all of the convenience that they’ve come to expect from us.

“We have a lot in store for 2024 and this launch is just the beginning.”

While Chip may be offering a new appealing rate, it isn’t quite topping the table for easy access ISAs yet.

Moneybox is currently offering an AER of 5.09 percent. A minimum deposit of £500 is needed to open the account, interest is paid on the anniversary, and up to three withdrawals are permitted without losing interest.

For those looking for more freedom to withdraw funds, Zopa’s Smart Saver offers an AER of 5.08 percent and can be opened with a minimum of £1. Interest is paid monthly and withdrawals are permitted at any time.

New research from Investec Bank found almost half (46 percent) of people have moved savings into better-paying accounts in the past 12 months.

Of those that haven’t switched, 19 percent plan to do so over the next 12 months, with just over half of these people (54 percent) planning to do so within the next three months.

Of those planning to switch money into better-paying accounts, 41 percent say they will choose instant access savings accounts, 22 percent will select fixed rate deals, 14 percent notice accounts, and 23 percent a mixture of all three.

However, savers are cautioned to carefully review the terms and conditions of instant access accounts before investing, as more individuals are discovering themselves subject to penalties.

David Hunt, head of retail savings at Investec, said: “It’s encouraging to see that so many people have switched their savings into accounts paying better rates of interest.

“There has been increased competition in the savings market, and it really does pay to shop around to ensure you are receiving a competitive rate.”

However, he noted: “People also need to ensure they understand the terms and conditions of the savings accounts they choose. For example, our analysis shows that of the top 50 instant access savings accounts for balances of £5,000, only 19 don’t have penalties, restrictions for withdrawing money, or rely on short-term bonuses to inflate returns.”

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