Savers have probably been the principle loser in the Bank of England’s monetary policy aimed at stimulating the UK economy and keeping the Bank Rate, the official interest rate, at 0.50 per cent for two-years.

But with the 2011 ISA season, savers have seen the interest rates offered for their tax efficient savings hit more competitive levels. We look at some of the leading rates currently available through Fair Investment Company.

Instant access

The hardest hit area by the low Bank Rate, instant access cash ISAs, have raised their game.

Open to anyone willing to invest £1 or more, the Halifax Cash ISA Direct Reward account is offering 3.00 per cent AER (variable), with unlimited withdrawals and deposits allowed within the £5,100 Cash ISA limit.

The ‘reward’ interest rate at 3 per cent applies for 12 months.

For existing Barclays Bank customers the third issue of the bank’s Golden ISA is currently offering 3.25 per cent AER (variable), with a £1 minimum deposit – this includes a 12-month bonus rate of one per cent.

Scottish Widows’ E-Cash ISA currently offers savers happy to bank online 2.50 per cent AER (variable) on deposits of £10 and above.

Fixed Rate

Royal Bank of Scotland’s 3 Year Fixed Rate Cash ISA offers savers with deposits over £1,000 3.70 per cent AER.  This is a limited offer available on a first come, first served basis until 16 March. Although only £5,100 can be invested this tax year, higher value deposits can be transferred from existing cash ISA accounts.

With an increase in the Bank Rate inevitable at some point, the Bank of England Governor has indicated a rate rise too soon would be a futile gesture in the battle against inflation. However, for those worried about the impact of future interest rises making a fixed-rate account uncompetitive, fixing for one or two years may be an option.

Halifax is offering 3.50 per cent AER on its two year Fixed Rate Cash ISA. The minimum deposit for the account is £500.

A one year fixed rate from Royal Bank of Scotland provides 2.65 per cent AER interest, with the minimum deposit £1,000.

As these are fixed rate accounts no withdrawals are permitted. Accounts can be closed to access the savings but this will incur an interest charge which will vary depending on the account.

Deposit protection

The Financial Services Compensation Scheme (FSCS) has been trying to raise awareness about the protection offered on deposits in the event of a firm being unable to meet its financial obligations or declared in default.

At the end of 2010, the FSCS limit per person, per registered institution increased to £85,000. This means that if you have £85,000 saved with a bank which goes bust, the FSCS will compensate you for the full amount.

It is worth remembering that this applies per institution rather than individual banking brand name. So if you have an account with Halifax and Lloyds TSB these will be treated as one institution, as both are part of the Lloyds Banking Group.

Cash ISAs are considered deposits and covered by the FSCS deposit protection regime.

© Fair Investment Company Ltd