Natwest ISA Review 2020 – Is it a Good ISA? Author: Kane Pepi 29 February 2020 If you’re based in the UK and looking to start putting some cash to one side, then you might be considering a traditional stocks and shares broker. However, while the returns can be plentiful, as are the risks. As such, if you’re instead looking for an investment channel that carries zero risk, you might be best off placing your cash in a simple ISA. With most high street banks and building societies now offering a range of ISAs, it will come as no surprise that Natwest is looking to take this particular segment of the savings arena by the horns. With that being said, if you’re interested to find out what Natwest ISAs are on offer – how much they pay, who they are eligible for and whether you need to lock up your money, be sure to read on. While most ISAs are virtually risk-free, not least because they are covered by the FSCS, you need to remember that the returns are going to be super low. As such, you’ll barely be lucky to outpace the rate of UK inflation. Visit Natwest Now Pros and cons of Natwest ISAs The Pros Natwest is a hallmark UK financial institutions with hundreds of high street branches Offers a variety of ISA types Most accounts can be opened online or via the app The option of injecting a lump sum and/or regular amounts Guaranteed to grow your money over time The Cons Natwest ISA interest rates probably won’t outpace UK inflation levels Natwest ISAs: What ISAs are offered? As is the case with most high street institutions, Natwest offers a range of ISAs for you to consider. Each with come with its own pros and cons, so we have broken down the fundamentals below. 1. Variable Cash ISA - Up to 0.85% AER per year If you’re looking for a standard Cash ISA that comes with the guarantees of long-term growth, then you might want to consider the Variable Cas ISA being offered by Natwest. The ISA in question pays a top AER rate of 0.85% per year. But wait! You will only get the top-tier rate if you are prepared to inject at least £50,000 into the ISA. Anything less than this and you will get a less favourable rate. For example, investments of between £1 and £9,999 will yield a measly 0.20%, and investments of between £10,000 and £24,999 will pay 0.35%. Alternatively, you will get 0.60% AER if you are willing to invest between £25,000 and £49,999. Irrespective of what investment level you do opt for, these rates are nothing short of below-par. The reason for this is that you should be able to find an alternative ISA provider that offers at least 1%. Moreover, you also need to make some considerations regarding the variable interest rate. While the rate could one day go up, equally, it could just as easily go down. Nevertheless, if you do decide to proceed with the Variable Cash ISA with Natwest, then you can get started with a minimum investment of just £1. On the flip side, the account does at least very least resemble that of an Easy Access ISA, meaning that you can make a withdrawal at any time without being penalized. Take note, if you do make a withdrawal, you won’t be able to replace it in the same year if it means you have already consumed your annual ISA allowance. Key Points: ✔️ Pays between 0.20% to 0.85% % AER interest per year ✔️ Required to deposit at least £50,000 to get the top-tier rate ✔️ Deposits below £10,000 get just 0.20% AER per year ✔️ Get started from just £1 ✔️ Easy Access – Make withdrawals at any time without being penalized ✔️ No fees for transferring existing ISAs in 2. Fixed Cash ISA - up to 0.90% AER per year If you don’t like the uncertainties that come with a Variable Cash ISA, then you might want to consider the Fixed Cash ISA available at Natwest. Interestingly, the top-tier rate available on the Fixed Cash ISA is actually higher than that of Variable ISA – which offers frictionless withdrawals. The reason that this is unusual is that you usually need to pay a premier for the ability to make fee-free withdrawals. However, this isn’t the case with Natwest. With that being said, the Natwest Fixed Cash ISA pays a top rate of 0.90%. In order to get this rate, you will need to lock your money up for a period of two years, and be happy to invest at least £25,000. If you’re fine with the lock-up period, but you don’t quite have the required £25,000 investment, then you’ll get a slightly lower rate of 0.70% AER. Alternatively, if you only want to lock your money away for 1 year, then an investment of at least £1,000 will get you 0.65%. You can get this up to 0.70% AER if you lock at least £25,000 up for the 1 year period. It is important to note that – as is the case with the vast majority of Fixed Cash ISAs in the space, you will need to make some considerations regarding withdrawal restrictions. At the time of writing, Natwest notes that you can make withdrawals until December 6th 2019. After that, you will need to see the 1/2 year term out in its entirety. If you really do need to access your cash before the lock-up period concludes, you will need to close your account. In doing so, you’ll be charged 90 days’ worth of interest. Key Points: ✔️ Pays a top-tier rate of 0.90% AER per year ✔️ You will need to invest at least £25,000 over a 2-year lock-up to get the highest rate ✔️ Withdrawals permitted until December 6th 2019 ✔️ After this, you will lose 90 day’s interest and need to close the account in order to access your money ✔️ Minimum investment £1,000 ✔️ Interest rate is fixed 3. Help To Buy ISA - 2.50% AER per year If you are in the process of buying your first home, or you’re simply looking to put some cash away to help pay for a deposit, then we would strongly recommend checking out the Help to Buy ISA being offered by Natwest. First and foremost – and as is the case with all Help to Buy ISAs, the UK government will match your deposits by an additional 25%. For example, if you deposit £100, the government will add £25 on top. Take note, the maximum amount that you can get from the government top-up is £3,000, which amounts to savings of £12,000. Nevertheless, on top of the 25% contribution, you have the chance to earn an additional 2.50% AER per year via Natwest. When you factor in the tax requirements on your government top-up this amounts to a tax-free income of 2.47%. You will have the option of injecting up to £1,200 within the first month of opening the account with Natwest, and then you will be capped at £200 per thereon. It is also important to note that the 2.50% AER offer is subject to change, not least because the rate is variable. In order to be eligible, you will need to be aged at least 16 years old, not have previously owned a property, and be resident for UK tax purposes. As you will be capped at £200 per month, you do have the option of putting your remaining annual ISA allowance into a different ISA. However, if you to proceed with the Natwest Help to Buy ISA, then the ISA needs to be with Natwest. Key Points: ✔️ 2.50% AER interest per year ✔️ This amounts to 2.47% of tax-free earnings ✔️ UK government will top up your deposits by 25% – up to a maximum investment of £12,000 ✔️ Deposit up to £1,200 in the first month of opening account ✔️ £200 cap per month thereon ✔️ Interest rate is variable so can change at any time 4. Stocks and Shares ISA - Interest % depends on investments If you don’t like the sound of the super low interest rates that come with a Cash ISA, or you’re simply not in the market for a Help to Buy ISA, then the final option available to you is the Natwest Stocks and Shares ISA. If you’re a seasoned saver, then you’ll probably know that most Stocks and Shares ISAs are largely the same. As we often noted, they are mere ‘shopping baskets’ that allow you to store your stocks and shares investments. In doing so, you will be able to shield the tax liable on capital gains up to the first £20,000 per year. So is there is anything notable about the Stocks and Shares ISA being offered by Natwest? No, not really. You will have the option of choosing your own investments or allowing an experienced fund manager to assist, which is industry standard. You will need to invest at least £50 to get started, and you will need to make your DIY investments via the Natwest trading portfolio. The only stand-out offering that comes with the Natwest Stocks and Shares ISA is that you get to pick your risk levels. Ranging from 1-5, this will determine the types of assets that make up your stocks and shares portfolio. You should also make some considerations regarding fees. You will need to pay up to 0.60% a year in maintenance costs (which is even more expensive than Hargreaves Lansdown), as well as transactions fee of up to 0.07%. Key Points: ✔️ Standard Stocks and Shares ISA ✔️ No guarantee that you will make gains – you could lose money ✔️ Annual maintenance fee of up to 0.65% ✔️ Choose a risk level that suits your appetite to risk FAQs Is my money safe in a Natwest ISA? Yes, your money is 100% safe when placing it in a Natwest ISA. As an established UK financial institution, Natwest is covered by the FSCS. This means that your money is protected by the UK government up to the first £85,000. However, if your money is stored in the Natwest Stocks and Shares ISA, then this goes down to £50,000. What if I need to access cash held in a fixed-term Natwest ISA? If you opt for the Natwest Fixed Cash ISA - you will need to lock your money away for either 1 or 2 years. If you find that you need to access your money in the case of a financial emergency, you will need to close your ISA. This will result in a loss of 90 days' worth of interest. Can I have more than 1 ISA at Natwest? You can. As you are allowed an annual ISA allocation of £20,000 per year, you can split the funds between more than one ISA. However, just remember that if opting for the Help to Buy ISA, this comes with lower annual limits.