LONDON, March 26, 2013 /PRNewswire/ --
Cash ISA savers are able to build their nest eggs three times as fast as it takes those putting their savings in instant access savings accounts according to research from HSBC.
If a saver was to invest their full cash ISA allowance of £5,760 from 6 April, based on current average cash ISA rates, they could expect their pot to have grown to £6,291 in five years, an increase of 9.2%. In contrast, someone saving the same amount in an instant access savings account, paying tax on their interest, would see just 3.3% growth after five years if they were a higher rate taxpayer and 4.4% if they were a lower rate taxpayer. Higher rate taxpayers would have to wait a further nine years to surpass £6,291, at which point cash ISA savers would have earned an additional £1,083 in tax-free interest.
Those willing to shop around could make even more of their tax efficient savings. HSBC's latest ISA range offers rates up to 2.75%. Based on this rate, ISA savers could increase their cash ISA pot by 14.5% in just five years if rates were to remain constant.
Bruno Genovese, Head of Savings at HSBC, said: "The benefits of making the most of your tax-free allowance are clear even in this low interest rate environment. While ISA rates may not be as high as in previous years, savers are often still better off in comparison to the other products in the market.
"When rates do return to higher levels, savers who have used their annual allowance each year will be able to benefit the most. Savers can still make above inflation returns by shopping around for the best rates available and taking advantage of their annual ISA allowance."
HSBC has a competitive instant access Variable Rate Cash ISA available to all HSBC current account customers. The ISA allows transfers in from other providers and has a minimum starting balance of £1.
Premier Bank Account customers
· 2.75% AER for balances on or above £15,000
· 2.25% AER for balances up to £15,000
Advance account customers
· 2.15% AER for balances on or above £15,000
· 1.65% AER for balances up to £15,000
All other HSBC current account customers
· 1.70% AER for balances on or above £15,000
· 1.60% AER for balances up to £15,000
Rachel Springall, finance expert at Moneyfacts.co.uk commented: "Savers may be limited by low rates compared to previous ISA seasons, however, they only have a short time to invest in this year's tax free allowance, so they need to use it or lose it. Any ISA paying above the 2.00% benchmark is considered a great rate in the current market."
HSBC Bank plc: HSBC serves 16.1 million customers in the UK and employs approximately 52,000 people. In the UK, HSBC offers a complete range of personal, premier and private banking services including bank accounts and mortgages. It also provides commercial banking for small to medium businesses and corporate and institutional banking services. HSBC Bank plc is a wholly owned subsidiary of HSBC Holdings plc.
The HSBC Group: HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 7,500 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and Latin America, and the Middle East and Africa. With assets of US$2,556bn at 31 December 2011, HSBC is one of the world's largest banking and financial services organisations.