Paragon Bank has reintroduced its popular “double access” cash ISA, offering a competitive 4.8% interest rate, but only for a limited time. This ISA requires a minimum deposit of £1,000 and allows two withdrawals per year without affecting the interest rate. ISAs offer a significant advantage over regular savings accounts, particularly for those accumulating substantial savings, as interest earned within an ISA is tax-free. This contrasts with regular savings accounts, where basic-rate taxpayers pay tax on interest exceeding £1,000 annually, and higher-rate taxpayers on interest exceeding £500. The Paragon Double Access ISA provides a balance between access and competitive interest, making it attractive for savers who anticipate needing occasional access to their funds.
While the 4.8% interest rate offered by Paragon is competitive, it’s important to compare it with other available options. Several digital banks and building societies are offering higher rates, often exceeding 5%. Price comparison websites such as Compare the Market, Go Compare, and MoneySupermarket are invaluable tools for comparing different savings accounts and ISAs, allowing users to filter by account type and interest rate. Consider your individual needs and financial goals when comparing. Easy-access accounts are ideal for emergency funds, while fixed-term bonds generally offer higher returns but restrict access to your savings.
Paragon’s Double Access ISA distinguishes itself as a market leader for those who value the security of an FCA-regulated bank and prefer online account management. Its key feature, the allowance of two penalty-free withdrawals, sets it apart from many other high-interest ISAs. However, it’s important to remember that easy-access ISA interest rates can fluctuate, unlike the fixed rates offered by fixed-term ISAs, which, conversely, typically restrict withdrawals. Therefore, while Paragon’s offering is attractive, it’s not the only contender in the high-interest ISA market.
Alternative options include Plum’s easy-access cash ISA, offering up to 5.18%, and MoneyBox’s cash ISA at 5.17%, though both require smartphone management. Trading212 offers a 4.9% easy-access cash ISA accessible online and via an app. However, it’s crucial to note that Trading212, like other e-money firms, deposits savings into client money accounts with established banks, which has implications for FSCS protection. If your combined savings with these banks, including those held through Trading212, exceed the £85,000 limit, any excess could be at risk in the event of bank failure. These alternatives offer unlimited withdrawals without penalty, a feature not available with Paragon’s ISA.
Deciding between an ISA and a regular savings account depends on individual circumstances. ISAs offer tax-free interest, making them particularly beneficial for higher earners whose savings interest might exceed their Personal Savings Allowance (PSA). Higher-rate taxpayers have a PSA of £500, while basic-rate taxpayers have a £1,000 allowance. With current interest rates, it’s possible to exceed these allowances with relatively modest savings, making ISAs increasingly attractive. For basic-rate taxpayers with limited savings, a regular account might be slightly more advantageous due to potentially higher interest rates, provided the interest earned remains below the PSA threshold.
Ultimately, the best choice depends on individual saving goals, income level, and access requirements. The Financial Conduct Authority (FCA) provides a useful savings calculator to help determine if you’re likely to exceed your PSA, providing a clearer picture of whether an ISA is the right choice for you. Compare interest rates, consider withdrawal flexibility, and factor in the tax implications before making a decision. Thorough research and understanding of your financial needs are key to maximizing your savings potential.
