Postcode lottery of cash ISA savings

The most competitive easy access, regular saver and help to buy ISAs are all restricted to savers in specific areas.
Living in the right area could give you up to a third more interest on your ISA.
Ipswich, Stockport and Cumbria are among the biggest winners in the postcode lottery.

Sarah Coles, personal finance analyst, Hargreaves Lansdown:

"The most competitive easy access, regular saver and help to buy ISAs are all restricted to savers in specific areas. As a result we face a postcode lottery of ISA rates, with pockets of the UK offering residents market-beating returns on their money – in one case over a third more than their nearest widely-available competitor.

People living in Ipswich may be able to get 1.6% on easy access cash ISAs, while those in Stockport can enjoy 1.7% on regular saver ISAs, and savers in Cumbria can make 3% on a help to buy ISA. If you’re in the market for a cash ISA, it therefore pays to check the small print of the highest-paying accounts, to see whether you could be a winner in the postcode lottery."

Why?

The reason for the postcode lottery lies in the number of building societies offering the top rates. In the current market, they make up three of the top five easy access cash ISAs, and all of the top five help to buy and regular saver ISAs.

Building societies are run with different aims to those of banks. A high street bank that is offered cheap funding from central government is likely to take advantage, because it means they don’t need to provide competitive rates to savers in order to attract money – and can sell cheap loans at better margins. A building society, meanwhile, is run for the benefit of all its members, both savers and borrowers, and therefore balances the needs of both when it decides whether to take cheap funding and where to set rates.

The fact that so many offer competitive help to buy ISA rates also reflects the founding principles of the building society movement – which were established in order to enable working people to get onto the property ladder.

Smaller building societies often focus on serving local savers and borrowers – either by stating where savers must live or by insisting accounts are opened in a branch. They can offer competitive savings rates to this select group, and maintain an optimum balance between savings and mortgage rates. If they were to open up these competitive savings rates to everyone, they would be inundated with savers, and have to remove the competitive rate very quickly – running the risk that locals would miss out.

Product	Best rate available	Best rate that isn’t restricted either to locals or existing members
Easy access cash ISA	1.6% Ipswich Building Society Stepping Stone ISA (also restricted to 16-20-year-olds)	1.16% AA, Paragon and Leeds Building Society
Regular savings ISA	1.7% Vernon Building Society	1.51% Furness Building Society
Help to Buy ISA	3% Penrith Building Society	2.56% Newcastle Building Society (must be opened in a branch) 2.53% Barclays

Winners of the postcode lottery

Get a better easy access cash ISA (Ipswich Building Society)*

IP - Ipswich

NR - Norwich

CO - Colchester

CM - Chelmsford

CB - Cambridge

PE - Peterborough

Get a better Regular Savings ISA (Vernon Building Society)

SK - Stockport

CW - Crewe

WA - Warrington

M - Manchester

WN - Wigan

OL - Oldham

BL - Bolton

HD - Huddersfield

Get a better Help to Buy ISA

Penrith Building Society

CA - Carlisle

LA - Lancaster

Tipton and Coseley Building Society*

B - Birmingham

DY - Dudley

WV - Wolverhampton

WS - Walsall

Cumberland Building Society

DG - Dumfries and Galloway

TD9 - Galashiels

NE46 - NE49 W Northumberland

PR - Preston

FY - Blackpool

BB1-2 and 6 - Blackburn

BB5 - Accrington

BB7 - Clitheroe

Vernon Building Society