Plum raises interest rate on market-leading Cash ISA to 5.17% | Personal Finance | Finance


Smart money app Plum has increased the interest rate on its market-leading Cash to 5.17 percent to “reward” savers and protect their savings from tax.

Cash ISAs have become increasingly popular over the past years with higher interest rates dragging more people into tax thresholds. These accounts allow people to save up to £20,000 a year tax-free.

Savers can launch Plum’s easy access ISA with a £100 deposit and interest is paid monthly. The interest rate includes a 0.88 percent bonus for 12 months, after which the rate will drop to 4.29 percent.

Easy access accounts also provide savers with more flexibility to dip into their pots when needed – although some slightly restrict this. Plum’s account allows up to three withdrawals in one year without penalty. After the fourth, the interest rate will drop to three percent.

Plum’s CEO and founder Victor Trokoudes said: “Our goal since day one has been to give customers the best tools to maximise their money. It’s brilliant that people can now get decent returns on cash savings.

“But high interest, coupled with many people moving into a higher tax bracket, means tax on savings is becoming more of an issue.

“This isn’t right – everyday savers shouldn’t have to lose out on the tax front just because they want their money to be accessible in cash.”

Mr Trokoudes continued: “We believe in rewarding savers. You can open an account in just a few taps and manage it easily in the app, alongside your other savings and investment tax wrappers.

“Customers can have peace of mind from knowing their money is secure, while also benefiting from the £20,000 ISA allowance.”

For those looking for more flexibility, Chip offers an AER of 5.1 percent with unlimited withdrawals. Savers need just £1 to launch an account and interest is paid monthly.

How to make best use of an ISA

With the end of the tax year fast approaching, Tim Bennett, head of Education at Killik & Co has shared a few tips on how to make the most of ISAs.

Firstly, Mr Bennett noted: “Be careful about cash. As we get closer to April 5, some people may be tempted to load up their ISAs with cash so that they don’t lose the annual allowance, and then wait a while to invest it.

“This is a reasonable strategy and better than the alternative, which is to risk missing out on this ‘use it or lose it’ allowance altogether. However, be careful. Every day that money sits in cash, it is being eroded by inflation.

Interest rates rarely keep up with inflation, even when allowing for the tax protection afforded by an ISA, so if your intention is to invest these funds into shares, don’t delay for too long.”

Secondly, Mr Bennett suggested people use up the allowance. He explained: “As noted, there is no way of carrying over unused ISA allowances from one tax year to the next. This is in contrast to pensions, where up to three years’ worth of allowances may be carried forward to then be used up.

“As such, check now whether you have any unused allowance remaining and also the deadline for getting the cash transfer done. Don’t forget that it can take a few days to clear the relevant funds from a bank account so try and avoid leaving this right until the last minute.”

Additionally, Mr Bennett said “Don’t keep checking in. Many people sensibly fill up their ISA via an app. After all, they are a simple, portable way to save and invest.

“However, the downside is that they regularly update the overall balance and it can therefore fluctuate daily according to what is happening across markets.

“The secret to successful long-term investing is not to be drawn into tinkering with an ISA – it is not a cash point machine, and any balance should be left alone to grow.”


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