Martin Lewis is advising Britons to make the most of their money as interest rates rise further.
According to the financial expert, savings account and Cash ISA rates have both improved in line with interest rate increases.
The Money Saving Expert has now offered his recommendations for the finest deals for individuals with £8,000 or more in savings. Lewis urges anyone who opened a Cash ISA more than six months ago, to “ditch it” because the “rate will be terrible”.
He added that people will earn more interest in an ISA than in a normal savings account, because of tax. Speaking on the latest episode of The Martin Lewis Podcast, he said: “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. 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.”
Martin then went over the best options right now, he said: “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% tax, your equivalent rate is 2.7 per cent, way lower than you would get in a cash ISA.”
He added: “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 6 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.”
Taking advantage of the greatest rates, according to Lewis, may help Britons earn hundreds of pounds in extra interest.