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ISAs for savers Recent figures from the Bank of England show the average return on a Cash ISA has fallen to 0.96% in the current low interest rate environment, against 5.06% last February. According to Hargreaves Lansdown, a recent poll of clients revealed more than half thought they were receiving over 4% interest on their Cash ISA. But the reality is that most variable rate Cash ISAs are paying less than 2%. Figures from moneyfacts.co.uk show the best rate currently available is 3.55% from Barclays Bank’s Golden Isa. In the wider cash ISA world, Hargreaves says the situation appears unlikely to improve soon, with consensus suggesting interest rates will not start to rise again for another 18 months to two years. The firms suggest various alternatives that may help improve returns. Once you have transferred to a Stocks and Shares ISA however, you cannot transfer back to a Cash wrapper. Meanwhile, Hargreaves suggests lower interest rates could provide a catalyst for a revival in two particular areas: corporate bonds and equity income. These areas are currently offering yields of 5% to 11% as well the potential for capital growth and when held within an ISA or Sipp any income or growth from corporate bonds is tax free. One fund the firm recommends is Invesco Perpetual Corporate Bond, which currently yields 6.4% (gross). In the equity income sector, it highlights Artemis Income, which currently
yields 5.8% (net). |
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