Kent Reliance this morning launched a best buy easy-access cash Isa as banks and building societies begin to react to Marcus Bank’s move 48 hours ago.
This is Money expressed hopes the opening of the Goldman Sachs-backed bank’s Isa to everyone on Wednesday would trigger a tax-free savings war, and the early signs appear positive.
The Kent-based provider launched an Isa paying 0.45 per cent on balances of £1,000 or more, a rate 0.04 percentage points higher than the previous best buy deal offered by Paragon Bank.
Kent Reliance now sits atop the tax-free best buy tables with a 0.45% cash Isa
The top two tax-free accounts both allow transfers from old Isas in a boost for savers with big pots paying little interest, as Marcus does not.
Until now 2021 had been something of a barren landscape for savers on the hunt for better tax-free rates. While March and April have historically seen banks launch top-paying rates to entice savers’ money, ‘Isa season’ this year had actually seen savings rates fall.
Of Britain’s major names, only Nationwide Building Society really got involved this year, with Marcus initially only launching its 0.4 per cent easy-access Isa to existing customers.
Facing balance sheet challenges, the Goldman Sachs-backed bank also limited maximum deposits to £20,000 by preventing previous year’s Isa transfers.
However, over the last week there have been several pieces of good news for savers.
Last Friday Paragon Bank nudged ahead of the chasing pack by launching a ‘limited edition’ Isa paying 0.41 per cent which could be opened with £1.
And then two days ago Marcus Bank launched a full-scale assault on the Isa market by opening its doors to everyone. Although not a best buy, it meant there are now six banks paying 0.4 per cent, beefing up the competition with a larger bank capable of soaking up more of savers’ money.
Aside from Marcus, Nationwide, which is offering an Isa that allows three withdrawals a year, and Leeds Building Society, the other three providers paying 0.4 per cent are smaller banks or building societies.
Kent Reliance is also a smaller provider with branches in Kent, Hampshire and West Sussex.
This means the rate is unlikely to be around for long, so savers who can benefit from opening an account with it should do so as soon as possible.
However, despite the flurry of moves at the top of the best buy Isa tables, tax-free rates remain close to record lows and analysts expressed doubts the last week heralded better times ahead for savers.
The Bank of England base rate remains at 0.1 per cent and many larger banks are stuffed full of deposits from savers who have benefited from the country’s multiple lockdowns over the last 13 months.
‘This is great news, and we really need it, although I don’t have too much hope that a lot more competition will follow’, Anna Bowes, the co-founder of Savings Champion, said.
‘That said, I would be very happy to be proved wrong so will wait and see if any of the other best buy usual suspects react.’
James Blower, an adviser to savings banks and founder of The Savings Guru, added: ‘It’s a suprising move from Kent Reliance to go so far above the current best buys but it is a great rate and opportunity for savers.
‘Those who aren’t already using their ISA allowance should also have a look as it beats the best non-ISA rates. I don’t think this will trigger a rate war and higher rates.
‘I suspect that the account, which is limited edition, won’t be available for long and that rates will stay at the lower levels they have been at so I’d recommend grabbing it quickly if it appeals.’
