Best cash Isas: Marcus Bank finally launches a tax-free savings account

Marcus Bank will FINALLY launch a best buy cash Isa next week after two years of hinting – will it help trigger a tax-free savings war?

  • The bank will pay 0.4% tax-free interest to savers from 6 April onwards
  • It does not allow previous year’s transfers or non-Marcus customers 
  • Marcus first hired a Isa product manager in 2018 but has only just launched one
  • Savings experts said the best buy deal could quickly disappear and could mean its market-leading easy-access deal would be cut in the next six months 

Marcus Bank has livened up Isa season by announcing it will launch a tax-free cash savings account, nearly two years after it first hinted it would enter the Isa market.

The account will pay a best buy rate of 0.4 per cent and will launch on 6 April, in time for the start of the 2021-22 tax year.

However, those hoping it will drive competition and drive up tax-free savings rates may be disappointed given the account is only open to existing Marcus customers and does not allow previous year’s Isa transfers.

Goldman Sachs-backed Marcus Bank will launch the tax-free account on 6 April – in time for the start of the 2021-22 tax year 

The limitations on the account suggest the Goldman Sachs-backed bank is still concerned about breaching British banking limits that would force it to ring-fence Marcus and leave it unable to use UK deposits to finance Goldman’s investment banking operations.

Marcus closed its market-leading easy-access account to new savers last June after it was inundated with interest from customers and concerned about breaching the £25billion limit. 

It is understood to have around half-a-million savers and around £21billion in deposits held in its easy-access and one-year fixed-rate accounts.

Both accounts now pay 0.4 per cent, with the rate on its easy-access account cut from 0.5 per cent to 0.4 per cent in mid-March, just five weeks after it reopened its doors to new customers.

That both its easy-access accounts are set to pay the same rate led one savings chief at a challenger bank to speculate the non-Isa option could be in line for another cut within the next six months.

He said: ‘Given it’s open to existing customers only and does not offer transfers in, I don’t think they are assuming big new flows. 

‘I think their assumption will be to predominantly cannibalise balances from their existing easy-access book into the cash Isa.

‘My gut feel is that this will be a precursor to another easy-access rate cut from Marcus in the next six months months – they are trying to chunk up their balances and de-risk their book.’

He said cash Isas were ‘more stable deposits than standard easy-access accounts’, meaning a rate cut would not cause the bank to see billions of pounds in deposits withdrawn overnight.

How has Marcus Bank’s easy-access rate changed since 2018?  
Date  Rate 
27/9/2018 1.5%
10/3/2020  1.45% 
7/5/2020  1.35% 
30/5/2020  1.2% 
4/9/2020  1.05% 
12/10/2020  0.7% 
11/12/2020  0.5% 
16/3/2021  0.4% 
Source: Savings Champion 

Kevin Mountford, co-founder of the savings platform Raisin UK, echoed this and said given the balance sheet challenges faced by the Goldman Sachs-backed bank that ‘the offer could be limited.

‘Otherwise’, he said, ‘as we have seen with the easy access offers, they will be quick to reduce rates once onboard.’

But he said the addition of another option at the top of the best buy tables was ‘good news for savers’ and proved ‘cash Isas are still worth having, particularly with such a good opening rate.’

The news is a nice surprise for cash savers who have seen this Isa season turn into something of a damp squib, with the exception of Nationwide launching an Isa which would pay over 1 per cent to savers provided they jumped through several hoops.

And it is also a surprise given Marcus Bank’s previous pledges to enter the Isa market have proved something of a false dawn. 

Marcus has consistently hinted it would launch an Isa since 2019, even saying last July one was coming 'soon'. However it is only launching one now

Marcus has consistently hinted it would launch an Isa since 2019, even saying last July one was coming ‘soon’. However it is only launching one now

It first hired an Isa product manager in September 2018, two-and-a-half years ago, the same month it launched its market-leading easy-access account in the UK, although that employee later left in October 2019.

Marcus managing director Des McDaid said in a May 2019 interview it would ‘likely’ launch new products in 2020, including Isas, fixed-rate bonds and joint accounts. 

However, the only new product which was forthcoming was a one-year fixed-rate savings account.

And the bank even told This is Money at the start of last July, nearly nine months ago, it would launch an Isa ‘soon’ for existing customers, after we broke the news the bank was looking for another Isa boss based in Milton Keynes.

It also put on hold plans to launch a tax-free investment account with the online investment service Nutmeg last year but will launch its own investment product in the UK in the second half of 2021.

And McDaid was once again offering hints to savings market watchers.

In the Isa announcement, the Marcus UK boss said: ‘It’s our first new product this year; we are working on exciting new offerings for the rest of the year and beyond, which will continue bringing value to our customers and help them make the most of their hard-earned money.’

Savings accounts