Martin Lewis warns those with more than £8K in savings to check their bank accounts now
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Martin Lewis has issued a warning to anyone with more than £8,000 in savings to ensure that they’re making the most of their cash amid recent interest rises.
The Money Saving Expert has shared a simple way you may be able to earn hundreds of quid in interest with minimal effort, which is my kind of money saving tip, to be honest.
He recommends checking that the account you're using for your savings has the best interest available - and to switch if you find a better one.
And to make things even easier he’s given the lowdown on the best rates for those with at least £8,000 in savings.
Speaking on the latest episode of The Martin Lewis Podcast on BBC Sounds, Lewis said: “It’s time for millions to reopen cash ISAs.
“The top pay 5.7 percent, 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.”
Lewis then took listeners through the top options for savers right now, and why it could be beneficial for those who do pay tax to consider the ISA.
He said: “On easy access savings, Chip pays 4.51 percent. The top Cash ISA Leeds Building Society and Principality pays 4.2 percent so normal savings are beating cash ISAs.
“If you are paying tax though, that Chip pays 4.5 percent but if you were paying 20 percent tax on Chip, then after 20 percent tax your equivalent rate is 3.16 percent.
“If you were paying 40 percent tax, your equivalent rate is 2.7 percent, way lower than you would get in a cash ISA.”
Lewis went on to urge people to check what their savings account is currently offering and compare it with other offerings and to switch if necessary.
“Some people who are locked into a cash ISA should be ditching it and paying the penalties,” he said.
“As a general rule of thumb, if you got a Cash ISA more than six 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.”