Principality ISA Builder

Principality Building Society is launching the 'ISA Builder Plan' an innovative new product on 6th April. The Plan links a fixed-rate bond with a fixed-rate ISA to create a convenient way for savers to make sure that they get the full benefit of their Cash ISA allowance.

Customers can choose to open Principality's new ISA Builder Plan either as a three-Year or five-Year version. When opened, the 5 Year Plan invests a customer's full 2010/2011 Cash ISA allowance of £5,100 into an ISA, which pays 4.6% AER (tax-free) and a further £20,400 into the Builder Bond, which pays 4.6% gross/AER.  For each of the next four years the Plan will automatically transfer the full annual Cash ISA allowance from the Bond to the ISA.  This allows savers to automatically make the most of their tax-free allowance whilst also earning a great rate on the remainder of their investment in the Bond. By the fifth year, when the Plan ends, the customer's entire investment of £25,500 will be invested tax-free and enjoying a fixed rate.

The three-year ISA Builder Plan works in the same way, investing the full ISA allowance each year and paying a fixed-rate of 3.8% AER (tax free) on the ISA Builder and 3.8% gross/AER on the Builder Bond.

Following the Chancellor's new rules in this year's Budget, which link annual ISA investment limits to inflation, savers will also be able to top-up their Builder Bond, to ensure that they can take advantage of the full annual cash ISA allowance.

Principality says that choosing the ISA Builder will give savers a better return on their money than either a standard fixed-term bond on its own or a combination of a fixed-term bond and a fixed-term ISA.  Principality believes the ISA Builder's tax-free returns will make the Plan especially attractive to higher rate taxpayers.

James Wright, Marketing Director at Principality Building Society, said: "ISA's are a great way of protecting your interest from the tax-man, but we appreciate that ensuring you are making the most of your cash can sometimes be a chore.  The ISA Builder removes the hassle for you, not only maximising your tax-free investment, but also ensuring that you earn a competitive, guaranteed rate on the money saved in the Builder Bond - and you won't have to remember to pay in your ISA allowance by the deadline every year!

Wright explains: "The Plan's fixed rates offer savers certainty in a climate where there is much uncertainty over where interest rates will be over the next five years. In the current climate higher rate taxpayers need to work even harder to get their money to work for them and, according to our calculations, the new ISA Builder Plan really will put their money through its paces."

Principality says the earlier you are able to open the Plan, the better the return. Customers who open the three-Year Plan prior to the 30 April 2010 could earn £1,630.90 or more in interest, depending on when they invest, whilst the return for those with a five-Year Plan is at least £5,684.66.

Interest on the Plan is paid annually and can be paid back into the Plan (although interest from the Builder Bond cannot be added to the ISA), transferred to another Principality account or paid to an account with any other UK bank or building society.

The Plan does not allow withdrawals or additional deposits (other than top ups for new ISA limits) nor are transfers-in of existing ISAs permitted.  However, partial or complete closure is allowed, subject 270 days' loss of interest for the 3 Year or 360 days' loss of interest for the 5 Year Plan.