How you can get £555 more interest by moving your cash ISA

Savers could now earn more than 13 times more interest on their Individual Savings Account (Isa) simply by switching from a poorly paying account to a top-paying one.

The gap between the worst and best cash Isas is so vast that savers with £17,356 – the average amount held by UK savers, according to the Building Societies Association – could earn an extra £555 just by switching.

Many savers do not switch because they worry it will be difficult or time-consuming. But it can be quick and simple if you follow our four steps.

Way to switch with ease…

1. Search the best-buy tables to find a good-paying Isa that suits you. You can use our savings tables above, or go to our sister website at thisismoney.co.uk/isas. Make sure you find an account that accepts transfers from other providers — most do.

2. Ask the new provider for an Isa transfer form or go on its website to find one.

3. Fill in the form. These are short and will usually ask for your name, contact details, date of birth, national insurance number and information about your existing Isa.

4. Send the form to your new provider. It will arrange the switch. You do not need to contact your old provider. Do not do the switch yourself by closing your existing account and setting up a new one. If you do, you risk losing the tax-free shelter on your savings.

You can transfer balances accrued in previous tax years to as many providers as you like. 

However, you can only pay new money into one Isa in any one tax year. Therefore, if you have already paid into an Isa since the start of this tax year on April 6, you must keep it where it is or transfer the full amount to a new provider.

Isa providers have 15 days to complete the switch.

How much could I save?

If you have not moved your Isa savings in some months or years, you could probably get a rate several times higher than your existing one.

High Street banks have been very slow to pass on interest rate rises from the Bank of England to their savings customers.

Some pay as little as 0.25 per cent on their easy-access cash Isas. Last week Halifax and Lloyds Bank raised the rate they pay on their easy-access cash Isas, but they still pay less than 1 per cent to some savers. 

Lloyds Bank Cash Isa Saver pays 0.85 per cent on balances up to £24,999, while at Halifax the Isa Saver Variable rate is 0.9 per cent on balances up to £9,999. Building societies and newer banks tend to offer much better rates.

For example, Skipton BS has just launched an account available online or through its branches at 3.25 per cent. Last week Shawbrook Bank put its rate up to 3.45 per cent, for those happy to open an account online.

Laura Suter, head of personal finance at stockbroker AJ Bell, says: ‘All too often money is just sitting in current accounts or in old savings accounts paying little interest. It means a lot of High Street banks don’t need to raise their savings rates to attract more business, as they have enough of the nation’s savings anyway.’

Are ordinary accounts better?

Until recently, ordinary savings accounts offered much better rates than cash Isas. But thanks to successive Bank of England base-rate hikes, cash Isas are back with a bang.

The gap between the best easy-access account and the best easy-access Isa was a huge 41 per cent. Now it’s down to 5.8 per cent.

Cash Isas also benefit from being sheltered from tax, so if you have not already used up your Isa allowance this year, it is likely to be a better option than an ordinary savings account.

Justin Modray, from advisers Candid Financial Advice, says: ‘Cash Isas are making a comeback, after years in the doldrums.’

sy.morris@dailymail.co.uk