A new best buy savings deal has launched enabling savers to secure a 3.47 per cent return when fixing for one-year.
Castle Trust Bank is offering the deal, which is the one-year bond that now tops the independent This is Money best buy fixed rate savings tables, having leapfrogged those launched over the past week by BLME and Charter Savings bank – both paying 3.4 per cent.
Someone stashing £20,000 in Castle Trust’s account could expect to earn £694 in interest after one-year.
Choice of two: Those with larger savings pots may want to consider Castle Trust’s one-year fixed rate cash Isa, which pays a market leading 3.15%
The fixed rate account can only be opened and managed online with interest being paid at the end of the 12 month period.
All deposits are protected by the Financial Services Compensation Scheme, up to £85,000 per individual.
Savers will need to deposit a minimum of £1,000 to start with and can save up to a maximum of £500,000 in the account.
What is Castle Trust Bank?
Castle Trust was founded in 2012 and and is backed by US private equity giant, J. C. Flowers & Co.
It applied for its banking licence in 2018 and gained full authorisation in June 2020. It released its first savings deals last year, with all its accounts being FSCS protected.
The bank, based in Basingstoke, operates without any branches. It uses savings deposits to fund lending operations.
It primarily provides mortgages for experienced buy-to-let investors and high net worth individuals as well as business loans.
It says its mortgages and loans are often provided to those who have high quality assets but unconventional income.
It scores respectively in terms of online ratings, albeit with only a small number of reviews. It scores 3.9 out of 5 on Google reviews, 3.4 out of 5 on Trustpilot.
| Type of account (min investment) | 0% tax | 20% tax | 40% tax | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Castle Trust Bank (£1,000+) | 3.47 | 2.78 | 2.08 | |||||||||
| BLME (£1,000+) | 3.40 | 2.72 | 2.04 | |||||||||
| Charter Savings Bank (£5,000+) | 3.40 | 2.72 | 2.04 | |||||||||
| Close Brothers (10,000+) | 3.32 | 2.66 | 1.99 | |||||||||
| Oaknorth Bank (£1+) | 3.32 | 2.66 | 1.99 | |||||||||
| Virgin Money (£1+) | 3.32 | 2.66 | 1.99 |
New best buy cash Isa deal alert
Those with larger savings pots may want to consider Castle Trust’s one-year fixed rate cash Isa.
This 3.15 per cent is currently the market leader among fixed rate cash Isa savings deals and will enable savers to shield any interest they earn from the taxman.
This is because any interest savers receive exceeding the personal savings allowance (£1,000 for basic rate taxpayers and £500 for higher rate taxpayers), will be taxed each year.
On a one-year fix paying 3.47 per cent, a basic rate taxpayer would need almost £29,000 saved to exceed their personal allowance, whilst a higher rate taxpayer would need almost £14,500 to exceed their limit.
Once the interest starts incurring tax on a 3.47 per cent rate, a basic rate taxpayer will effectively be earning 2.78 per cent after tax, whilst a higher rate taxpayer will effectively be earning 2.08 per cent after tax.
Sean McCann, chartered financial planner at NFU Mutual, said: ‘After years of low interest rates, savers finally enjoying better returns could get stung by an unwanted tax bill.
‘With 3.5 per cent available on fixed rate savings, some higher rate taxpayers need less than £15,000 in savings to trigger a tax bill.
‘During times of high inflation, every pound counts and nobody wants to pay tax on their savings.
‘Many people could be better off moving part of their savings into an Isa, where the interest they receive is tax free.
‘With inflation rampant, those looking for the real growth on their money and willing to take more risk with their investments should consider investing in a stocks and shares Isa that offers the potential to beat inflation over the longer term.’
Castle Trust Bank’s cash Isa deal must be opened and managed online, with a minimum of £1,000 required to open the account. It accepts transfers in.
Like with the fixed rate bond, savers can only withdraw their money without incurring any charges at the end of the 12 month period.
The next best one-year deal is offered by Santander and pays 3 per cent.
Currently, inflation is 9.9 per cent, with no accounts currently coming close to matching this.
Meanwhile, base rate is 1.75 per cent after a number of rises since December which has been the catalyst for savings deals improving.
However, another rate rise is expected on Thursday, with forecasters expecting it be 0.5 or 0.75 percentage points, which could result in savings deals heading higher in the coming months.
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