Nationwide has launched new bonus rates for its e-ISA and Champion ISA accounts.

Nationwide has introduced new bonus rates on two of its ISA accounts in order to make the offers more competitive.

The building society’s e-ISA overall rate will rise to a market-leading 2.90 per cent per annum gross for balances over £1 across all ISAs opened from the beginning of this month, including a 1.15 per cent gross per annum fixed introductory bonus.

Meanwhile, the Champion ISA will also see its rate rise to 2.70 per cent per annum for balances of more than £1,000.

Nationwide expressed confidence that its packages offer some of the best ISA rates in the industry, which will appeal to those who have not yet used their full allowance for the year.

Robin Bailey, Nationwide’s director for savings, said: “As one the country’s leading savings providers, Nationwide is committed to looking after its savers and helping them make the most of their savings.”

Last month, the firm predicted that UK consumers may begin saving more money as a result of the recent increase in VAT.

Meanwhile, the end of 2010 saw an increase in the amount of money being saved with mutuals.

People with savings accounts such as ISAs or fixed bonds at mutuals boosted their combined balances by more than £2 billion at the tail end of 2010, it has been revealed.

According to data published today (February 1st 2011) by the Building Societies Association (BSA), these balances at such institutions rose by £1.5 billion in December of last year, which followed on from an increase of £0.6 billion one month previously.

Brian Morris, head of savings policy at the BSA, commented that this shows mutauls enjoyed a “strong end to the year”, but he warned that households across the UK still face a “challenging year ahead”, meaning they may be forced to dip into their savings at some point in 2011.

Gross mortgage lending by mutuals slipped slightly from £2 billion in November 2010 to £1.8 billion one month later.

This comes after research by Cheltenham & Gloucester recently showed that many older people are storing cash away for their grandchildren in savings accounts.

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An ISA – or Individual Savings Account, is a government scheme designed to encourage us to save. Every year, we are each given a set limit, and all interest you earn within that limit is tax-free. (Given that the tax on your regular accounts is automatically deducted, many people aren’t actually aware that they pay on tax on the interest in their accounts.)

It seems from market research carried out by various companies that one of the reasons so many people are shunning ISAs is because of the low interest rates on offer. Certainly, the fact that the Bank of England base rate is the lowest it’s ever been makes it a lot harder to find ISA rates of 5 or 6% that were once common place.

However, even with rates as they are, ISAs can be an extremely effective way of saving money. If you plan on making regular, long-term savings in to your ISA account, the savings versus a regular account can indeed be significant.  Indeed, if you were to save £50 a month over 20 years, on an account with a 2% rate, you’d save £300 in tax! To put that another way, that’s like 6 months free saving, courtesy of the tax man.  If you are a higher-rate tax payer or that figure become even more significant.

For those who are still looking for a potentially higher rate of return, you can still do so in a tax efficient manner. A Stocks and Shares ISA allows you to invest £7,200 a year in the stock market. The tax savings will depend on your individual circumstances as will the amount of money you earn. As investments of this nature can go up as well as down, you won’t have the guarantee that would have with a cash ISA (or indeed, with a regular savings account) but the income generated (and the tax savings) have the potential to be an active part of any investment portfolio.

Where to invest your money is an important decision, but it’s also a personal one. Before the end of the tax year, make sure you get the financial advice that you need to make the most of your savings and investments.

Tax free individual savings accounts, known as ISA’s, are a great way for everyday people to get the best possible returns from their savings and come in two different forms, Cash ISA’s and stocks and shares ISA’s. In the current economic climate stocks and shares ISA’s are seen as relatively risky meaning many savers opt for the more consistent cash ISA’s, which are basically savings accounts.

For many consumers using an ISA is a great way to benefit from tax free income. To ensure they are getting the most from their savings consumers should keep a close eye on the available savings products and rates. By ensuring the best rate is obtained for their funds savers will maximise the returns and financial benefits they receive from their investment. To get the best rate for savings consumers are often required to transfer their funds to a higher interest paying account. Due to conditions of an ISA account this process has to be done from bank to bank, the customer cannot simply withdraw funds and take them to a new bank. Previously this has been a laborious process with transfers taking up to 6 months and some funds being misplaced! Three of the major banking forces in the UK, Lloyds TSB, Natwest and Abbey, have now introduced electronic cash ISA transfer which should see transfer times reduced significantly to as little as 12 days. As well as decreasing the transfer time dramatically this new transfer method will hopefully ensure consumer funds are not misplaced.

Whether investing in a cash isa or a stocks and shares isa it is essential to get the best investment. If this is done through a cash isa a savings calculator can be a big help.

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