ISA interest rates - confused....

[FunkyD]

NS&I and some other institutions show a tax free rate and then an equivalent gross rate e.g.

NS&I state:

Tax-free rate pa/AER
4.80%

Equivalent gross rates
Guaranteed to stay 0.30% above the base rate until at least 5 April 2009 6.00% basic rate, 8.00% higher rate

So, what is the rate I get? 6% or 4.8%? ISAs are tax free so why show two rates?

:?:

[cjanderson]

you get 4.8%

and pay no tax. So they are just showing that it is AS GOOD as a 6% account to a basic 20% taxpayer.

[farmroad38]

You'd get 4.8%. I imagine they are showing you the equivalent rate that you would have to get from a normal tax-paying account for comparison purposes.

Edit: Doh! Beaten to the draw by CJ!

[FunkyD]

Right - makes sense. Time to look around as the rate was 6.3% (Oct 2007) and has now dropped to 4.8%!

Thanks.

[Kryten]

Natwest has a good one if you have over 18k to move over. The abbey direct ISA is 6% at the moment (I have all mine in there)

[farmroad38]

Right - makes sense. Time to look around as the rate was 6.3% (Oct 2007) and has now dropped to 4.8%!

Thanks.

Icesave had quite a good rate a couple of weeks ago :nuts::lol:

[FunkyD]

Surely the best deals right now are the 1year fixed rate ISAs?

If I move my accounts to a higher rate variable, there is nothing to say it wont drop possibly quicker than some of my accounts that are currently above base rate?

Abbey looks ok but I think a better deal is perhaps Nationwide - 1 year @ 5.75% - I guess it depends whether you prefer to risk a rate cut but have access if you need it or go for a fixed rate but no access for a year....

Edit: Nationwide offer a 3 year fixed rate ISA @5.75% - might be worth it if you think rates will drop and you can lock the money away....