Focus on: Maximise savings returns with a two-year fixed rate ISA
Last month's rise in inflation shows that savers can't afford to take their eye off the ball.
After six months of falls, inflation, as measured by the Consumer Prices Index (CPI), rose from 3.4% to 3.5% in March, providing a timely reminder that savers can't take anything for granted.
While the move up is generally thought to be a blip and inflation is expected to continue its downward trend over the next few months, it is still vital to make sure it impacts as little as possible on your savings.
One of the best ways to do this is to lock your money away for an agreed time period - and another is to ensure you don't pay tax on the interest earned. This is where BM Savings' market-leading two-year fixed rate ISA comes in.
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Contact: 01858 468192
Valid until: Friday, May 31 2013
What's the deal?
BM Savings two-year fixed rate ISA pays a market-leading 4.05% annual interest tax-free on a minimum investment of £500.
You can deposit up to a maximum of £5,640 in the current tax year, and the account also accepts transfers from existing ISAs.
You can make withdrawals if you need to, but these should be avoided as they will result in an interest penalty. You will lose 180 days' interest on the amount withdrawn if you take out money during the first year of the ISA, and 90 days' interest on any money you take out during the second year.
You must be aged 16 or over and a UK resident to open this account.
Any catches?
Savers signing up to the BM Savings ISA must be absolutely certain that they can afford to tie their money up for two years, so this account isn't for anyone who wants easy access to their savings.
The account can only be operated by post, so it won't suit savers who prefer online or branch access to their savings.
For those who prefer to be able to view their savings online, Santander's Fixed Rate Major ISA pays 4.00% annual interest tax-free, again for two years, plus an additional 0.10% if Rory McIlroy wins an eligible golf Major. This account can be opened with a minimum deposit of £1 and again accepts transfers from existing ISAs, but no withdrawals are permitted during the fixed term.
What's the verdict?
Paying 4.05% tax-free, the BM Savings ISA comfortably beats inflation, making it a great option for savers who want to preserve the purchasing power of their money. However, you must be prepared to tie up your savings for the full two-year term, as the penalties for making a withdrawal are steep.
Top tip
It is worth remembering that the highest returns go to savers who are prepared to tie up their money for even longer than two years. For example, Halifax's ISA Saver Fixed account pays a market-leading 4.50% to savers who can afford to lock up their cash for five years. The account can be opened with a minimum investment of £500, and accepts transfers from existing ISAs.
However, bear in mind that if you are tying up your money for several years, while rates may look appealing now, they might not seem quite as attractive once interest rates start to rise.
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