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Savers should be getting ready to switch their cash Isas for a better deal

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Savers should be getting ready to switch their cash Isas for a better deal.

A host of top-paying accounts on sale this time last year will pay lower rates once you have been in the account for 12 months. These rates can plummet from an attractive 3 per cent to as little as 0.5 per cent.

The next three months of the year are a popular time for switching, a report for the Office Of Fair Trading reveals.

Some 1.3 million cash Isas were transferred last year, with four out of ten moving in May, June and July.

The number is likely to increase this year, as savers discover just what poor rates they earn. For the first time, interest rates must be printed on the annual cash Isa statements now being sent out. This can be as low as 0.1 per cent in some older accounts.

Savers, who have more than £198billion in cash Isas, are often forced to move their money each year to earn a decent rate of interest. While top rates on offer break the 3 per cent barrier, the average is just 0.65 per cent.

  More... BEST ISAs: Our five favourite best buy cash ISAs for 2012 Best savings rates: Cash Isas, fixed rate Isas, regular savings Isas

Banks and building societies launch a stream of new cash Isas towards the end of one tax year and the beginning of the next.

These often come with short-term bonuses of as much as three percentage points.

Yet once the bonus vanishes, savers are left earning a pittance if they fail to move their money.

Lloyds Banking Group, one of the largest cash-Isa providers, admitted this month that its savers can do better by switching. It reports that it enjoyed a successful Isa season ‘while continuing to not pay leading rates’.

Examples of tumbling rates include Halifax’s Isa Direct Reward, on sale between February and July last year, at 3 per cent, but the rate drops to 0.5 per cent after a year.

With BM Savings Isa Extra Issue 2, a top-paying account on sale from April last year, the bonus lasts for 15 months. After it runs out, savers will earn a lower 1.7 per cent, down from 2.9 per cent.

A bank or building society does not have to accept transfers into a particular account — the rules say it is up to them whether they do or not. And top-paying accounts typically do not.

Neither Cheshire Direct Cash Isa postal account, at 3.5 per cent including a bonus [more details], nor Barclays Isa Saver, which pays a decent 2.75 per cent in the High Street [more details], will accept your cash Isa money built up with other providers.

And Saga, which pays the top one-year fixed rate at 3.6 per cent, won’t either [more details].

Others encourage you to switch to them. Halifax, Nationwide and Lloyds TSB give an Isa promise to pay the new higher rate from the time they receive your transfer application form — rather than waiting for your money to turn up from your old account.

But this pledge applies only to new money coming in, penalising current savers.

If you want to switch from Halifax Isa Saver Direct at 0.5 per cent to Halifax Isa Saver Variable at 2.75 per cent, you can miss out on up to 15 days’ interest at the higher rate.

Isa-switching rules say a bank or building society has up to 15 working days to complete  the transfer.

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