Will this trigger a tax-free savings war? Marcus Bank opens its cash Isa paying 0.4% to new customers
- Tax-free account from Marcus was finally launched after two years of waiting
- It was initially open to existing customers only
- It still does not accept transfers but the tax-free account is now open to all savers in a boost to those who hope Isa rates will rebound from record lows
All rate-starved savers can now benefit from Marcus Bank’s near-best buy Isa after it launched a full-scale assault on the tax-free savings market.
The Goldman Sachs-backed bank dipped its toe into the tax-free savings world last Tuesday with a 0.4 per cent Isa open only to existing customers.
However, one week later it has put the account, which is just 0.01 percentage point off the top spot, on general sale, in a boost for hopes that Isa rates will improve. It can be opened with £1.
Goldman Sachs-backed Marcus Bank has put its cash Isa on sale to all customers
It said it had closely monitored the demand for the Isa when it launched last week, having ‘phased the launch’.
When Marcus Bank launched its easy-access account in September 2018, which paid 1.5 per cent, it helped prop up savings rates.
However, with Marcus only around £4billion away from breaching ring-fencing rules, the account may not be on-sale or pay a top rate for a very long time.
The ring-fencing requirements, which would ban Goldman Sachs from using UK savers’ deposits to finance its international investment banking operations, likely explains why the account will still not accept previous years’ Isa transfers.
As a result, those with sizeable Isa deposits earning a lower rate would be better off with Paragon Bank. Its limited edition easy-access Isa pays a market-leading 0.41 per cent and does accept transfers in.
The move means Marcus now joins the likes of Nationwide and Leeds building societies and a raft of smaller banks and mutuals paying 0.4 per cent.
There was a disappointing absence of new tax-free savings deals in March and April this year, with Isa rates currently lower than they were at the start of March, as This is Money reported on Tuesday.
|Account type||Top 5 average rate 1 March 2021||Top 5 average rate 1 April 2021||Top 5 average rate 13 April 2021|
|One-year fixed-rate Isa||0.49%||0.43%||0.44%|
|Two-year fixed-rate Isa||0.6%||0.58%||0.58%|
|Source: Savings Champion|
The end of the old tax year and start of the new one have historically been known as Isa season, where banks offer top-rate deals in a bid to lure savers who still have chunks of their £20,00 Isa allowance left to use up.
However, the introduction of the Personal Savings Allowance in 2016, lack of competition in the Isa market and a wider environment which has seen savings rates collapse has meant Isa season has increasingly become a damp squib.
Cash Isas proved less popular than their non-tax-free equivalents during the pandemic, with just £1.806billion more held in them by the end of this February.
By contrast, over £140billion has been saved in total in the same period as more money was put away during three lockdowns.
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Anna Bowes, co-founder of the analyst Savings Champion, told This is Money on Tuesday: ‘It is disappointing that the new tax year has not seen much meaningful competition.’
But the move from Marcus could help push up tax-free rates given it is one of the largest banks in This is Money’s best buy tables and has topped them for much of the time since its launch in 2018.
When Marcus announced its move at the start of the 2021-22 tax year, Kevin Mountford, co-founder of savings platform Raisin UK, said it was ‘good news for savers’ and ‘proved cash Isas are still worth having’.
But, given the balance sheet challenges faced by the bank, he said the offer ‘could be limited’. This applies even more now the account is open to all savers.
The bank said in a statement: ‘We are pleased to extend the availability of our cash Isa to new customers, as well as existing account holders.
‘Our cash Isa is an easy-access Isa with a competitive interest rate of 0.4 per cent, with no fees or charges.
‘We closely monitor the deposits we hold, so phased the launch of our cash Isa by offering it to Marcus customers initially, before expanding to new customers from today.’