MARTIN Lewis has issued an urgent warning to anyone with a savings account as you could lose thousands of pounds.
The financial expert, 51, said his latest advice to make the most out of your savings applied to anyone who had opened a Cash ISA more than six months ago.
ITVMartin Lewis has advised people to check the interest rate they are getting on their savings[/caption]
Interest rates have risen sharply in recent months as the Bank of England (BoE) tries to curb inflation and ease the cost of living crisis.
High street banks have been raising the rate of interest they pay on savings accounts to reflect the BoE’s base rate increases.
Lewis advised people should shop around to find the best rates which could mean they benefit to the tune of hundreds of pounds thanks to the increased interest rate.
His latest advice applies to anyone who has savings of £8,000 or more.
He recommends that anyone who opened a Cash ISA more than six months ago, you should “ditch it” because the “rate will be terrible”.
Lewis said that savers will get a better rate of interest in an ISA than an ordinary savings account, because of the tax.
He said in the latest episode of The Martin Lewis Podcast on BBC Sounds: “It’s time for millions to reopen cash ISAs.
“The top pay 5.7 per cent, and with rates rising, anyone with £8,000 in savings, check now if your money’s in a cash ISA.
“Cash ISAs usually pay slightly less than the equivalent normal savings. So it’s only for those people who would pay tax.
“So it’s roughly over £8,000 for a lower rate taxpayer and £16,000 for a higher rate taxpayer, over those amounts are when you want to start looking at it.”
Lewis then explained what the top options now were.
He added: “On easy access savings, Chip pays 4.51 per cent. The top Cash ISA Leeds Building Society and Principality pays 4.2 per cent so normal savings are beating cash ISAs.
“If you are paying tax though, that Chip pays 4.5 per cent but if you were paying 20 per cent tax on Chip, then after 20 per cent tax your equivalent rate is 3.16 per cent.
“If you were paying 40 per cent tax, your equivalent rate is 2.7 per cent, way lower than you would get in a cash ISA.”
The money expert also urged people to check what the best bank accounts are now.
He said: “Vanquis Bank pays 6.15 per cent as the top one-year fix in normal savings.
“NatWest is paying 5.7 per cent in its top cash ISA one year fix.
“Some people who locked into a Cash ISA should be ditching it and paying the penalties.
“As a general rule of thumb, if you got a Cash ISA more than 6 months ago, you’re probably better to get out of it.
“If you locked in more than six months ago your rates would have been terrible.
“You will have to pay a penalty to get out but generally you will earn more in the new ISA than the interest penalty will cost you because an interest penalty where the interest isn’t very high isn’t that much.”
PA:Press AssociationPeople could get a better rate of interest by switching to a newer Cash ISA if they have savings of £8,000 or more[/caption] Read More