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ISAs hit by low interest rates Go compare with our comparison table

ISAs hit by low interest rates

20 January 2010 / by Andy Davies

Low interest rates are 'hurting savers' according to, which has revealed that ISAs are paying little more than an instant access savings account.

New analysis of's 'best buy' variable rate ISA and instant access savings account has revealed that its variable rate ISA is paying around £95 in annual interest on a £3,600 investment – which is approximately £8 more each year than a savings account – the equivalent of 73 pence a month.

Meanwhile, despite the average one year fixed rate ISA offering a marginally better return than a variable rate ISA – 2.70 per cent compared to 1.31 per cent, it equates to just over £14 more a year than non ISA products on a £3,600 investment.

Commenting, Andrew Hagger, spokesman said: "The current low interest rate landscape is really hurting savers with Inflation wiping out the spending power of their cash, and even when you opt for the tax free option that the government encourages us to take advantage of, the returns are still quite pitiful.

"Whilst I appreciate that tax free status of your ISA savings is ring fenced and carried forward for future years, at the present time consumers are certainly not going to be falling over themselves for such measly returns on their cash."

However, investing in an ISA with its tax benefits may be more 'worthwhile' to higher rate taxpayers according to Mr Hagger. For example, while the annual interest on an ISA investment of £5,100 is around £135, a typical savings account will pay just over £92 after tax – a difference of £43.

But he added: "The Bank of England rate cutting policy may have been the right cause of action to take at the time, but with base rate stuck fast at 0.5 per cent since last March, savers are getting a raw deal all round."

© Fair Investment Company Ltd