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Is the Cash ISA becoming too complicated?


The Individual Savings Account was first launched by Gordon Brown in 1999 when he was Chancellor of the Exchequer. It was purposely designed to be simple and straightforward to encourage more people to start saving for their future, yet still have access to their money when they needed it.

Fast-forward to today and that simplicity seems to be disappearing. We’ve noticed a definite trend in the growing complexity of more and more ISAs, so whilst savers now have greater choice with different ISA types; including Stocks and Shares ISAs, Junior ISAs and Lifetime ISAs, they are becoming ever-more complicated. Even regular Cash ISAs are being rolled out with convoluted terms and restrictions, making it more difficult to compare like-for-like products and decide which is the best ISA for you.

With it being the start of the new tax year, there’s no shortage of ISAs on offer and plenty of good opportunities for savers. But before you jump in and commit your savings to the ISA with the headline-grabbing rate, take a moment to examine the small print. There may just be a few ‘catches’ that mean you end up missing out on the full amount of interest you were expecting.

Here are some of the restrictions to look out for when you’re deciding which ISA is the best place for your savings:

  • Bonus rates. Some ISAs offer an introductory interest rate known as a bonus rate and these are often limited to an initial period. After this time has elapsed, your interest rate drops down meaning you won’t earn as much as you might have expected over the longer term.
  • Restrictions on withdrawals. If there’s a chance you may need to access your savings; such as in an emergency, then be mindful of ISAs that limit you to a set number of withdrawals throughout the year. In these instances, if you exceed the limit then there are usually penalties where your interest rate could be reduced, or you may even sacrifice your capital.
  • Restrictions on deposits. When you find a good savings opportunity, it’s natural to want to add to your balance throughout the year to maximise your return. If you’re planning on making further deposits then beware of accounts that place a restriction on how much you can add each month, as these may well limit your interest-earning potential.
  • Eligibility. Sometimes the best ISA rates are reserved for existing customers who already have a product with the account provider; or for those who have been a customer for a minimum period of time. Be sure to check for this condition, else you could find you’ve tied your savings up in an account paying a lower rate than you thought.  

As a tax-free way to save, a Cash ISA could be the best place to invest your savings this year; but make sure the terms are right for you. With the added complexity around today’s ISAs, it may pay to look beyond the account with the headline rate in your search for the best opportunity for your money.  


For simple and straightforward savings products, why not take a look at our range of ISA accounts

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551