Martin Lewis issues warning to anyone with savings account as you could lose thousands of pounds
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Martin Lewis has issued an urgent warning to savings account holders who could be at risk of losing thousands of pounds.
His latest advice is for those who want to make the most out of their savings and for anyone who has opened a Cash ISA more than six months ago.
Cash ISAs are basically savings accounts that pay interest free of Income Tax.
The 51-year-old advises people to think twice about where they are putting their savings after a sharp increase in interest rates in recent months.
in the latest episode of The Martin Lewis Podcast on BBC Sounds, he said that 'it’s time for millions to reopen cash ISAs'.
“The top pay 5.7 per cent, and with rates rising, anyone with £8,000 in savings, check now if your money’s in a cash ISA,” Lewis explains.
“Cash ISAs usually pay slightly less than the equivalent normal savings. So it’s only for those people who would pay tax.
“So it’s roughly over £8,000 for a lower rate taxpayer and £16,000 for a higher rate taxpayer, over those amounts are when you want to start looking at it.”
His advice is mainly for those who have savings of £8,000 or more.
He added: “On easy access savings, Chip pays 4.51 per cent. The top Cash ISA Leeds Building Society and Principality pays 4.2 per cent so normal savings are beating cash ISAs.
“If you are paying tax though, that Chip pays 4.5 per cent but if you were paying 20 per cent tax on Chip, then after 20 per cent tax your equivalent rate is 3.16 per cent.
“If you were paying 40 per cent tax, your equivalent rate is 2.7 per cent, way lower than you would get in a cash ISA.
“Vanquis Bank pays 6.15 per cent as the top one-year fix in normal savings...NatWest is paying 5.7 per cent in its top cash ISA one year fix.
“Some people who locked into a Cash ISA should be ditching it and paying the penalties.
“As a general rule of thumb, if you got a Cash ISA more than 6 months ago, you’re probably better to get out of it.
“If you locked in more than six months ago your rates would have been terrible.
“You will have to pay a penalty to get out but generally you will earn more in the new ISA than the interest penalty will cost you because an interest penalty where the interest isn’t very high isn’t that much.”