Isas will offer a better deal for savers following recent changes and could even offer a suitable alternative to pensions, it has been suggested.
Savers using an Isa are entitled to set aside a certain limit each year without the tax man getting his hands on any of the cash, which may make it a great option for those looking to make their money go a little further.
Earlier this week the Office of Fair Trading (OFT) revealed it has come to an agreement with the Isa industry on a number of changes.
This arrangement came following a super complaint by the consumer watchdog Consumer Focus about the length of time transferring money to a new bank or building society can take.
At least 17.5m people in the UK have £143 billion held in cash Isas, meaning the benefits of the changes could be widespread.
In addition to this, the Investment Management Association found that Isa sales for April were at their highest for nine years.
With 11 per cent of Isa holders switching to a new provider in a typical year, the report could be of use to you.
Changes made easier
A part of the new plans, interest rates will be clearly published on the front of cash Isa statements and guidelines about how long cash Isa transfers should take will be revised.
This is done with the intention of benefiting consumers by ensuring new transfer timelines are met, preventing potentially costly delays.
HM Revenue & Customs and the Financial Services Authority (FSA) change their guidance to reflect the revised industry guidelines the FSA considers taking regulatory action if the industry fails to keep to the new timescales.
If delays occur, consumers are no worse off than they would have been if the timelines had been met.
A 90-day investigation was carried in order to determine changes that demand transfers are down to 15 working days from the previous 23 days.
At present, only around 15 per cent of Isa holders currently receive statements that include their interest rate.
However, savers will have to wait for this change to come into place as banks and building societies have been given until May 2012 to amend Isa statements to include this information.
Reductions in the time taken to transfer Isas will not have to change until the end of this year.
What the experts say
The British Bankers’ Association said it “broadly welcomed” the OFT report, saying the agreed measures were “a clear example of how the industry has been listening to the concerns of customers and consumer organisations”.
Mike O’Connor, chief executive of Consumer Focus told the BBC it was disappointing that banks had been given such a long deadline to implement the changes to their customers’ statements.
“Consumers will be right to ask if it is reasonable to wait so long for such a basic change,” he stated.
Pierre Williams, spokesperson for MoneyExpert.com, said: “Isas have always been popular and easier and faster switching of Isa accounts, together with greater transparency of rates offered will further benefit customers.”
He also suggested that consumers may increasingly turn to Isas rather than pensions.
Mr Williams said: “The real concern with pensions is the lack of certainty over how much of an income they will provide on retirement. Isas – and particularly cash Isas – provide much more clarity of their worth at any one time. People look for security in times of economic turmoil and cash Isas deliver on this.”
Time to change?
Savvy consumers will be aware that it can often be wise to shop around for a better deal.
People with Isas may want to take a look at the offers currently available to find the best rate for their cash.
One option that may be worth considering is the Royal Deposit ISA from RBS, which offers a rate of 3.5 per cent on balances between £3,600 and £5,100 with interest paid on maturity.
To compare ISA products from the UK’s leading providers click here.
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