Plum boosts interest on Cash ISA to 4.98% and earns ‘excellent’ rating | Personal Finance | Finance

Money app Plum has raised the interest rate on its easy access Cash ISA to a bumper 4.98% AER. The account takes a leading position in its sector, and savers can launch it with a minimum deposit of £1.

The 4.98% AER is paid on deposits of £100 and more, and the rate includes a 1.66% bonus for 12 months. Up to three withdrawals are permitted per 12-month period, and basic interest (3.29%) is paid monthly, but the bonus (1.66%) will be paid after 12 months. Cash ISAs have grown in popularity over the past few years as higher interest rates drag more people into savings tax thresholds. These accounts currently allow individuals to save up to £20,000 a year tax-free.

While Plum is offering the top rate for easy access ISA savers, there are some key terms to take note of. Firstly, the full 4.98% interest rate is only offered for 12 months, so customers should review the account at that point to check if it still places competitively.

Secondly, just three withdrawals are permitted per calendar year, penalty-free. On the fourth withdrawal, the rate will drop to 3.29%.

Commenting on the deal, Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: “The latest update from Plum has seen it increase the rate on the £100 tier of its Plum Cash ISA. The account retains a competitive position in the market when compared to its peers. Savers can invest as little as £1, but they should keep in mind that they will not receive the headline rate at this level.”

However, she noted: “Interest is paid monthly, which is good news for consumers looking to boost their income. Overall, this deal earns an Excellent Moneyfacts product rating.”

What else is out there?

For savers looking for more flexibility with withdrawals, Trading 212 joins Plum with the market-leading 4.98% Annual Equivalent Rate (AER). The deal includes a bonus rate of 0.88% for 12 months, and savers can launch the account with just £1. Interest is paid monthly, and withdrawals are not restricted.

Investment app Moneybox places just behind with an AER of 4.65%. The offer includes a 0.7% bonus rate for 12 months, and savers can launch the account with a minimum deposit of £500. However, like Plum, a lower interest rate will be paid if more than three withdrawals are made in one year.

Savers are being urged to make the most of the current £20,000 tax-free Cash ISA allowance amid rumours that Chancellor Rachel Reeves plans to slash it for the next tax year.

City leaders and financial firms have been mounting pressure, arguing that reducing the Cash ISA allowance could encourage more savers to invest in UK companies and stimulate the stock market. Some have called for the cap to be slashed to as little as £4,000.

Colin Low, managing director at Kingsfleet, said: “It would be highly unlikely for current Cash ISAs to have their terms amended retrospectively, so if you still want to maximise your tax-free savings, then make sure that you use your current year allowance (£20,000).”