IG offers a huge 8.5% rate on cash savings - is it worth taking?

IG has blasted its way into the investing platforms skirmishing to offer savers the most attractive headline interest rates, introducing a boosted 8.5 per cent rate on uninvested cash.

IG’s new rate* gives savers the opportunity to earn double the base rate on up to £100,000 until the end of August, after which the rate drops to match the Bank of England's benchmark.

While the boost only lasts three months, the bumper rate may mean some consider it is worth taking.

But cash savers should note that IG is an investment platform and to access the boosted rate, you must both place a trade before 31 May and hold an investment at the end of each of the three months.

IG’s custody fee could also catch out those who don’t intend to actively invest. If you trade at least three times in a quarter then there is no account fee, otherwise IG charges £8 per month.

Earlier this month, the Bank of England voted to cut its benchmark interest rate by 0.25 percentage points to 4.25 per cent.

While interest on savings isn’t necessarily tied to this base rate, providers take changes into account when deciding on rates to offer savers.

Some have already cut rates in reaction to the drop.

All this follows a heated battle at the beginning of April among a troupe of providers that kept inching up their three-month boosts as the end of the tax year approached.

Two providers from that clash are still duking it out: CMC Invest* and Moneybox. Three-month fixed boosts from these providers mean savers opening one of these accounts today should comfortably beat the base rate until August.

While providers have generally been boosting rates on Isas, IG’s 8.5 per cent rate* applies to uninvested cash held in any of its accounts – whether it’s an Isa, Sipp or General Investment Account.

The catch is that as an investment platform, IG is offering the rate to encourage cash savers to start trading. This means it's more suited to those who have some experience with investing already.

New customers (and existing customers who haven’t yet placed a trade) must open an account and make an investment before 31 May to be eligible for the offer.

You’ll receive a boosted rate each month that you hold the investment, until 31 August.

You’ll also be eligible for the rate for each month you buy or sell an investment or hold one of IG’s Smart Portfolios, which are its ready-made investment option.

IG says if you opened an account on 9 May, had £20,000 in cash and met all the conditions each month, you’d earn £520 in interest.

If you want to invest, IG is just one of many available investment platforms, and because it charges a fee for holding assets if you don't trade, it's potentially a more costly choice than others.

This fee could catch out savers going for the boost who don’t intend to trade actively.

If you make less than three trades each quarter you'll be charged £24, but there's no fee if you make more than three trades.

It’s important you check the terms and conditions of the deal and read more about the fees that IG charges.

Finally you should make sure you open an investment account and not a trading account, which includes spread betting and CFD trading. IG says that 71 per cent of investors lose money when trading in this way on the platform.

> Find out more about IG's deal*

Savers can beat the base rate with both CMC Invest* and Moneybox, who are offering more straightforward boosts on cash Isas.

Although the earning potential isn't as high, there's no obligation for cash savers to invest.

In our view CMC Invest's 5.7 per cent account, including a 0.85 per cent three-month boost, beats Moneybox's because it offers more flexibility around accessing your money.

Keep in mind Moneybox has announced that its headline boosted cash Isa rate is going down to 5.46 per cent on 29 May, including a 1.51 per cent three-month bonus. CMC Invest hasn't announced a cut, yet.

When looking at cash Isas with short bonuses it is important to consider what the average rate over a whole year will be. CMC Invest's account averages 5.06 per cent over a year (but is yet to be cut) while Moneybox's will average 4.33 per cent after its looming cut.

In contrast, Trading 212* has already lowered its rate in response to the Bank of England cut and is paying 4.86 per cent, including a 12 month 0.76 per cent bonus.

For more alternatives you can also read our regularly updated round-up of our favourite cash Isas.