Anyone who has under £20,000 in savings issued five-week warning

People with under £20,000 in savings have been urged to consider cash ISAs - but on a "wait-and-see" approach. Households thinking of taking out a cash ISA have been urged to wait until March - some five weeks away - as the Cost of Living crisis continues.

Anna Bowes, a personal finance expert at the financial advisory firm The Private Office, said: “For the first time in 18 months, a five-year bond is paying more than the top one-year bond – great news for savers looking to lock in higher returns."

She added: “But how long will it last? If you’re ready to tie up some of your cash, now could be the perfect time.” It all means a longer-term fixed bond “could become more desirable”, says Rachel Springall, finance expert at financial data provider Moneyfacts.

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On cash ISAs, Ms Springall says banks and building societies are likely to make efforts to entice savers with better deals on fixed-rate Isas in the weeks ahead, but any rate war would not be until March and early April, she went on to advise.

“Therefore, some savers may feel inclined to adopt a wait-and-see approach until nearer the new tax year,” she adds. Cash ISAs are just savings accounts you NEVER pay tax on. Everyone in the UK aged 18 or over gets an ISA allowance at the start of each tax year – for 2024/25, which ends on 5 April 2025, it's £20,000.

Money Saving Expert explains in a handy guide: "Just like normal savings, cash ISAs come in different types. There's easy access, where you withdraw whenever you want, and fixed rate, where you get a guaranteed rate but are supposed to lock cash in for a set time."

The top paying accounts are Trading 212 at 5.1 per cent and Plum at 5.01 per cent.