Martin Lewis has offered more advice to help people make the most of their money during the interest rate hikes.
The Money Saving Expert said the rates for savings accounts and Cash ISAs both have improved after the constant Bank of England interest rate hikes.
He said it means that searching for the best rates could result in gains of hundreds of pounds of interest in people’s savings accounts.
He has done the hard work for savers by giving his advice on the current best rates for those who have savings of £8,000 or more.
His advice is that if you opened a Cash ISA more than six months ago you should ‘ditch it’ because the ‘rate will be terrible’.
He said that people will earn more interest in an ISA than in a normal savings account, due to tax.
Speaking on the latest episode of The Martin Lewis Podcast on BBC Sounds, Martin said: ‘It’s time for millions to reopen cash ISAs.
‘The top pay 5.7%, 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.’
Martin then took listeners through the top options right now. He said: ‘On easy access savings, Chip pays 4.51%. The top Cash ISA Leeds Building Society and Principality pays 4.2% so normal savings are beating cash ISAs.
‘If you are paying tax though, that Chip pays 4.5% but if you were paying 20% tax on chip, then after 20% tax your equivalent rate is 3.16%.
‘If you were paying 40% tax, your equivalent rate is 2.7%, way lower than you would get in a cash ISA.’
Martin then urged people to check what the best bank accounts are right now.
He said: ‘Vanquis Bank pays 6.15% as the top one-year fix in normal savings. Natwest is paying 5.7% 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 6 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.’
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