No-transfer cash ISAs growing more common place

Savers looking for the best tax-free savings accounts have had a spanner thrown into the works as more banks and building societies bar transfers in to new cash ISAs over the past few years, industry experts say.

Out of the 172 variable interest rate cash ISAs currently available to savers in the UK, 18 of these do not permit transfers in.  While at first glance this may seem like a suitably small minority, a good number of these 18 accounts are best buys, offering some of the most attractive ISA savings rates, which can be frustrating for savers looking to build their ISA pots from previous years.

Cash ISA products are noteworthy due to their tax-free interest.  The Government has seen fit to encourage their use by raising the annual investment cap on cash ISAs to a new high of £5,640, yet providers offering the most attractive rates will not allow transfers in.

Industry experts believe that the rationale behind the decision is that banks and building societies are less after high balances but are looking to pad the number of customers in their database.  Doing so will allow them to promote other products they provide to these savers.

According to one finance expert, providers see little benefit to themselves in paying headline rates to a relative handful of ISA savers that have build up large balances over the years.  Instead, banks and building societies would much prefer to have tens of thousands of ISAs with £5,640 each in them, giving them access to a much larger number of customers to promote their other products to instead.

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