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Multitudes of Cash Individual Savings Account (ISA) holders are foregoing hundreds of pounds in potential earnings

Widespread Cash ISAs Hold Billions in funds, Earning aPaltry 1.5% Interest or Lower

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3 min read
Large sums of money are sitting idly in Cash Individual Savings Accounts (ISAs), earning interest...
Large sums of money are sitting idly in Cash Individual Savings Accounts (ISAs), earning interest rates as low as 1.5% or fewer.

Multitudes of Cash Individual Savings Account (ISA) holders are foregoing hundreds of pounds in potential earnings

Here's a fresh take on the article discussing the importance of getting a high-interest cash ISA and how to transfer your existing ISA to a better-performing account:

Millions of savers are losing out on hundreds of pounds each year due to their cash ISAs earning paltry interest rates.

Over £46 billion sits in almost 6.9 million cash ISAs that pay interest rates of 1.5% or less, according to data from Yorkshire Building Society. The average balance for these cash ISAs is around £6,700, but the amount stashed in these low-paying accounts has grown by £3 billion in the last year.

If you're keeping cash in a lackluster cash ISA, you could be missing out on a significant amount. The highest-paying cash ISA on the market currently offers an interest rate of 5.56%, while a cash ISA paying 1.5% would earn you less than half that amount.

Here's an example: if you deposited £6,700 into a cash ISA paying 1.5% for a year, you'd end up with £6,800.50, earning £100.50. But in the highest-performing cash ISA, your deposit would earn £372.52 in interest by the end of the year, amounting to a total of £7,072.52. This means you could gain an extra £272.02 by choosing a market-leading account.

Moreover, the purchasing power of your ISA holdings is being eroded as inflation exceeds these low interest rates. Since April 2021, inflation has not been at 1.5% or below. The UK has experienced high inflation recently, peaking at 11.1% in October 2022, and prices increased by 2.8% in the year to February 2025.

Harry Walker, senior savings manager at Yorkshire Building Society, expressed his surprise that such a large amount is still sitting in low-paying ISA accounts after two years of significant increases to savings interest. Walker urges savers to take action and make the most of their hard-earned money. Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, echoed this sentiment.

To find the current highest-paying cash ISA and transfer your existing cash ISA to a better-performing account, follow these steps:

  1. Research: Explore the latest ISA rate tables for easy access cash ISAs and fixed-rate cash ISAs. Check for rates up to 4.99% (availability or restrictions may apply) for easy access cash ISAs. For fixed-rate cash ISAs, consider providers offering competitive rates for two-year terms.
  2. Use Comparison Sites: Sites like Moneyfacts and comparison tools from Which? and Money Saving Expert maintain up-to-date tables of the best ISA rates and explain provider reputations and service quality.
  3. Access Mobile Apps: Many top ISA providers offer mobile app access for easy account management.
  4. Transfer Your ISA: To transfer your existing cash ISA, check with your current provider for any penalties or early withdrawal fees. Then open a new cash ISA with a higher rate and suitable access terms for your needs. Use your new provider’s ISA transfer form to move the funds directly without impacting your annual allowance.
  5. Monitor the Transfer: Keep track of your transfer, as it typically takes 15–30 days. If you already subscribed to another cash ISA in the current tax year, only previous years' funds can be transferred; current-year contributions may need to stay with the original provider unless your new provider is set up to accept them.
  6. Confirm Completion: Once the transfer is complete, verify the funds have moved with both providers and keep records.

By following these steps, you can maximize your interest earnings and maintain a tax-efficient savings plan. For more detailed tips on transferring your cash ISA, visit our website.

Investing in a high-interest cash ISA can significantly boost your savings compared to accounts paying 1.5% or less, as shown by the example where a £6,700 deposit could earn an extra £272.02 in a year with a market-leading cash ISA. To find such a high-performing account, research the latest ISA rate tables for both easy access and fixed-rate cash ISAs, use comparison sites, and transfer your existing cash ISA to a better-performing account following the provided steps. Prioritizing personal-finance and investing strategies can help you increase your savings and maintain a tax-efficient plan in the face of inflation.

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