Abbey boosts rate on new super ISA to 8.1 per cent

Abbey has raised the rate on its new Super ISA to 8.1 per cent AER tax-free until 1 May 2008. The Super ISA is a cash mini-ISA that will offer 8.1 per cent to customers who put an equal amount or more into Abbey’s tax-efficient Guaranteed Growth Plan.

The rate change is effective immediately and will be applied to all accounts that have been opened since the product was launched (2 March 2007).

Reza Attar-Zadeh, Head of Savings and Investments at Abbey, said: “We are delighted to see others following our lead by increasing rates. Our product has been designed not only to allow instant access to savings earning great tax-free rates, but also to encourage tax-efficient longer-term savings. In addition to this, Abbey’s product, is available to all existing and new customers, allows transfers in of existing ISA balances and offers the potential benefit of investing in the stock market without the usual associated risks.

“This compelling product combination pays 8.1 per cent on instant access tax-free savings (equates to over 10% savings rate for basic rate tax payers) and the Guaranteed Growth Plan offers customers not only the potential for higher returns through investing in the stock market, but a guarantee of the money deposited and a minimum return if the funds are held for the full term (three or 5.5 years).

“The cash ISA element is free from income tax, while the GGP element is taxed under Capital Gains Tax (CGT) rules. Less than one per cent of the population utilise their CGT allowance, currently at £8,800.”

Reza Attar-Zadeh added: “The Guaranteed Growth Plan is ideal for customers who want to beat top savings returns by investing cautiously in the stock market. For the more sophisticated investor, Abbey’s broader range of investments is also available with the Super ISA.”

Based on market research that customers do not feel they are saving enough for their futures (72 per cent of consumers don’t believe they’re saving enough), Abbey has developed this market-leading product to help customers build their savings in a tax-efficient way. The product has been designed both to allow instant access to money placed in the Super ISA offering 8.1 per cent interest, whilst deposits in the Guaranteed Growth Plan are invested for the longer term (three or 5.5 years) offering guarantees both on the money deposited and a minimum return, if the money is left for the full term. The product allows transfers in of existing ISA balances customers may already hold.

Should a customer not wish to put away their money for the longer term, they can save into Abbey’s Direct ISA, which offers a rate of up to 5.75 per cent.

Super ISA – Highlights

8.1 per cent AER until 1 May 2008, when the Super ISA reverts to Abbey’s Direct ISA
Direct ISA offers a highly competitive rate (Currently 5.5 per cent to 5.75 per cent, including a 0.5 per cent bonus until 1 May 2008)
Available to new and existing customers. Free transfer service of cash mini ISAs from other providers
Account offers instant access by telephone, post, internet and cash machine
Interest is calculated daily, and there is no penalty for withdrawal
Minimum investment of £500
Effective rate of 10 per cent for basic rate tax payers or 13.33 per cent for higher rate tax payers

Guaranteed Growth Plan (GGP)

Capital guaranteed with a guaranteed minimum return of nine per cent over a three-year period or 23 per cent over a 5.5-year term
Potentially greater returns, depending on the performance of the FTSE 100 index
Subject to Capital Gains Tax regime, so is therefore more tax efficient than bonds that attract income tax (annual CGT allowance is currently £8,800)
Minimum £500 investment to qualify for Super ISA

Abbey’s investment range

All on-sale growth based investments also qualify for the Super ISA. This includes our Multi Manager & Inscape range where the majority of the funds have returned top quartile performance over the last three years (Jan 04 to Dec 06).