If you opened a Santander Direct ISA Saver last year, check your rate now. If you haven't upgraded, it could now be paying as little as 0.5%.
MoneySavingExpert.com has looked again at the top cash ISAs from late March 2013. While many didn't include a bonus, nearly all of have now cut their rates, with Santander customers the worst off.
Santander's Direct ISA was one of MoneySavingExpert.com's best buy cash ISAs last March, paying 2.5%. But a year on, the rate on the account has just dropped, or will soon drop for many savers, to a measly 0.5%, unless you've got more than £10,000 saved.
If you have one, you should receive a letter from Santander warning you 60 days before the rate drops.
However, it's easy to move your account to one of Santander's other top-paying ISA options, including a 1.6% easy-access ISA or a two-year fixed ISA paying 2.3% for 123 current account or credit card customers.
Just ask to upgrade online or in-branch, or transfer to another provider without penalty. See our Top Cash ISA Transfers guide for the best buys, and our Top Cash ISAs guide for our top picks for new money.
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Have other best buy cash ISA rates fallen?
See the table below for a round-up of what the best buys from last March are currently paying, assuming the account was opened more than a year ago.
Santander, Cheshire BS and NS&I customers can all earn more by transferring their cash to the current top paying easy-access ISA which allows transfers of old ISA money Santander's new Direct ISA Saver (issue 6) paying 1.6% AER, or BM Savings' 1.65% AER ISA if you've got at least £20,000.
|Product||Launch rate||Incl bonus of...||Bonus ends||Other scheduled rate drops||Rate now if opened a year ago|
|Santander Direct ISA Saver (issue 1)||2.5%||N/A||N/A||None||0.5% (i)|
|Cheshire BS ISA Saver (issue 2)||2.3%||1.8%||31 Oct||None||1.5%|
|Tesco Bank||2.3%||0.3%||A year after opening||Dropped to 1.75% on 6 Apr||1.75%|
|NS&I||2.25%||N/A||N/A||Dropped to 1.75% Sept 2013, to 1.5% Feb 2014||1.5%|
|(i) No fixed bonus but customers automatically moved to Santander ISA Saver after a year. Pays 0.5% for those with less than £10,000 saved.|
But it's not all bad news for savers. Tesco Bank customers, for example, are better off sticking with their ISA despite the falling rate, as its 1.75% deal beats Santander's 1.6%.
Bonus rate accounts were few and far between last March, and most bonus of them only lastest for a year. This year, only one of our top picks includes a fixed bonus, meaning savers have to keep a closer eye on their accounts and prepare to transfer funds to a higher-paying account when necessary.
If I can get 5% in a current account, are ISAs worth it?
Yes, as with ISAs it's all about the long-term gain.
Cash in an ISA stays tax-free. Interest on other accounts will be taxed at your usual tax rate 20% basic rate, 40% higher rate or 45% for top payers (those earning over £150,000).
So if an ISA provider drops the rate, you have the right to transfer it to a different ISA account and keep the tax-free benefits. With current accounts, the rates are good but only in the short-term.
However there is a way to get the best of both worlds higher rates now, and a tax-free lump sum in the future.
Instead of putting your cash in an ISA now, put it in a top-paying current account. Options include Santander* paying 3% AER on £3,000-£20,000, Nationwide* giving 5% on up to £2,500 or Lloyds offering 4% for £4,000 - £5,000.
Then, at the end of March 2015, a week before the end of the tax year, withdraw the cash and put it in a cash ISA. You'll have earned the higher interest rate for the year and stashed it in an ISA in time to make use of your tax-free allowance.
For a full analysis of the pros and cons, read Martin's Get 5% on your ISA money blog.
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