Smart money app Plum is launching its Cash ISA today with a market-topping rate of 5.15% AER (variable), designed to reward savers and protect their savings from tax.  

The Plum Cash ISA holds cash savings tax-free up to the ISA limit of £20,000. It is available to all customers in the UK, who can also benefit from Plum’s smart automation to manage their money. 

Interest rates on savings are at a 15-year high in response to the Bank of England having raised the base rate to 5.25%. However, as income tax thresholds have been frozen, the rise in savings rates means more people are being drawn into having to pay tax on interest earned. 

Between 2022-23 and 2028-29, this set of threshold freezes means nearly 4 million additional individuals will be expected to pay income tax, 3 million more will have moved to the higher rate, and 400,000 more onto the additional rate according to the OBR. 

With this in mind, UK savers are increasingly turning to ISAs. The latest Bank of England figures suggest that monthly overall contributions have averaged net £4bn per month over the previous 12 months, compared with the nadir of a net £1bn+ being withdrawn in March 2017. 

Despite this, high street banks have kept their instant access Cash ISA interest rates relatively low. Higher rates have typically only been accessible through fixed-term ISAs or, when available, accompanied by excessive restrictions such as being an existing customer of a particular bank.

The Plum Cash ISA, by contrast, is offering the top variable rate on the market, more than double the rate offered by the four main high street banks and higher than the average industry rate of 3.5%. Customers can start saving into the account with just £100 to access the 5.15% rate with Plum. 

The product sits alongside a portfolio of wealth-building tax wrappers already available in the Plum app, including its popular stocks and shares ISA and SIPP products so people can manage their money all in one place. The Cash ISA will also be open to transfer-ins. 

Plum’s CEO and founder Victor Trokoudes comments: “Our goal since day one has been to give customers the best tools to maximise their money. It’s brilliant that people can now get decent returns on cash savings. But high interest, coupled with many people moving into a higher tax bracket, means tax on savings is becoming more of an issue. This isn't right – everyday savers shouldn't have to lose out on the tax front just because they want their money to be accessible in cash.” 

“We believe in rewarding savers, and that’s why we’re really excited to be launching our market-leading Cash ISA. Cash ISAs aren't a new concept, but we’ve reinvented it by doing it the smart way, so savers can also benefit from Plum’s automation. You can open an account in just a few taps and manage it easily in the app, alongside your other savings and investment tax wrappers. Customers can have peace of mind from knowing their money is secure, while also benefiting from the £20,000 ISA allowance. And they know they are getting the best rate with Plum.”