Martin Lewis fan lands £982 cash boost as money saving expert explains which bank accounts to ‘ditch now’
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Martin Lewis has issued a warning to anyone who has opened a certain bank account - and the tip could save you hundreds of pounds. The Money Saving Expert founder shared the advice on his latest episode of the BBC 5 Live show The Martin Lewis podcast.
During the episode, Martin warned listeners that it might be time to ditch their Cash ISA, into which savers age 16 and over can deposit a maximum of £20,000 per tax year. If you opened one of these accounts more than six months ago, it’s likely that it has a “terrible” rate due to rising interest rates, he said.
Martin explained: “Millions of people should be opening or reopening cash ISAs, the top cash ISA rate currently pays 5.9 per cent. And crucially because savings interest rates have gone up, or at least the top savings interest rate have gone up, millions of people are now going to be potentially paying tax on their savings interest which they haven’t been doing for years and a Cash ISA protects you from that.”
Martin pointed out that it might even be worth paying the inevitable penalty charge to close the account early because you’ll make it up in interest. The interest you could earn from changing accounts could be greater than the cost of the penalties - but only if you have more than £8,000 in the account.
It comes after the Bank of England raised rates 13 times since December 2021, and most recently they went up by 0.5 percentage points from 4.5 per cent to 5 per cent. The majority of banks have passed on these new rates to savers.
“If you locked in more than six months ago your rates would have been terrible,” Martin went on. “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.”
Martin told listeners thinking about switching that using an online calculator may help. The consumer champion then read out an email he had received from a fan who told him they had landed a £982 boost after using a calculator on the MoneySavingExpert website before “ditching and switching”.
During the episode, Martin also talked about some of the best offers available. Shawbrook Bank is offering 5.53 per cent on a minimum £1,000, with a 90 days’ interest early withdrawal penalty, while NatWest is paying 5.7 per cent in its top cash ISA one year fix (with a 90 days’ interest early withdrawal penalty).
People looking to invest should consider Stocks and Shares ISAs, although you only get £20,000 a year in total on ISAs so you “have to make a choice about which one’s right for you”. Premium bonds are also tax free and rates are going up to 4 per cent - but Cash ISA rates are higher.
If you claim Universal Credit, Martin recommends looking into the Help to Save scheme which has a potential 50 per cent bonus. For first time buyers age 18-40, Martin advises looking at a Lifetime ISA or LISA which can give you a 25 per cent boost on your savings towards your first home.