Aldermore offers fixed rate Isa at 4%

By ALAN O'SULLIVAN
Updated: 07:57 EST, 22 January 2010

Aldermore, Britain's newest bank, has launched a series of best-buy fixed rate Isas in the run-up to Isa season.

Pound for pound: Aldermore's bonds are among the most competitive.

Banks and building societies will soon begin to launch their best-buys as the end of the tax year draws to a close on April 6 and savers scramble to use up their tax-free allowance of £3,600 (£5,100 for the over 50s).

The bank, which was borne out of Ruffler Bank in May last year, has launched a one-year bond at 3.05%, a two-year at 3.6% and three-year at 4%.

Those who wish to withdraw money early from the one-year bond will suffer a 120 day loss of interest, while the others carry a 180 day penalty.

They all have a minimum investment of £3,600 and accept transfers from other providers.

This is Money says: All of these are great deals, which is of little surprise as Aldermore has been something of a plucky little trailblazer on savings rates since it was created.

The one-year bond is just behind the two best deals from Santander at a whopping 3.5% and Skipton Building Society at 3.2%. Both have tiny minimum balances at £1 and £50 respectively, although the Santander account is only operated by post, which may turn off some savers.

Aldermore's two-year bond at 3.6% is just behind the best from Saga at 3.85% and just ahead of a host of other providers offering 3.5%. However, Saga requires a large minimum balance of £30,000, the majority of someone's Isa savings over the past few years.

On the other hand, those who wish to use up the remainder of their Isa allowance may not be able to use Aldermore's offer and may not mind sacrificing the 0.1% to put their several hundred pounds with Santander, Saga, C&G, Halifax, Nationwide or Birmingham Midshires.

New kid: as a new bank, Aldermore needs to attract custom through high rates.

The three-year bond is one of the best on the market, tying with Marks & Spencer and Nationwide. The only difference is the latter two have smaller minimum balances (at £500 and £1 respectively), so depositing in these may better suit your needs.

The minimum balance is finicky and means you cannot deposit in these with new cash if you have already put money this year into an existing Isa opened in prevous years (unless you are over 50 and have the raised £5,100 allowance). Otherwise, these are great deals that should be considered.

On another note, it's good to see that some providers are finally offering decent short-term fixed rate Isas relative to taxed fixed rate bonds. The disparity in rates between Isas and taxed accounts is a widespread problem in the savings industry.

The Aldermore bonds and its immediate competitors would be a good choice over taxed bonds over one and two years. Unfortunately, the same cannot be said over longer terms like three and five years.

Rating: four out of five stars