Hargreaves Lansdown enters cash savings market with new easy access Isa launch

Britain’s largest investment platform is set to shake up the savings landscape as Hargreaves Lansdown unveils its first easy access cash Isa, developed in partnership with challenger bank Shawbrook. The new product launches at a variable rate of 3.45 per cent, with Hargreaves pledging not to let the rate fall more than 0.65 percentage points below the Bank of England base rate, currently standing at 4 per cent.

While the actual customer deposits will be safeguarded by Shawbrook, securing up to £85,000 under the Financial Services Compensation Scheme, Hargreaves Lansdown will have control over setting the rate. This move positions the firm in direct competition with both high street giants and smaller challengers in the burgeoning cash savings market.

Mark Hicks, a representative of Hargreaves Lansdown, highlighted that significant sums are languishing in low-interest or even zero-interest accounts within the traditional banking sector. He pointed out that smaller banks and new market entrants often entice savers by offering headline rates or temporary bonus rates, only for these to plummet after six to twelve months, leaving customers short-changed unless they keep switching their accounts.

The firm, already managing £157.3 billion of assets across 1.9 million clients, has seen its cash savings business play an increasingly central role. Clients currently hold about £12.7 billion in cash within investment accounts, in addition to £11.4 billion through its Active Savings platform. This platform allows clients to spread their savings across multiple banks seamlessly from a single interface—a feature well suited for substantial balances.

Cash proved a lucrative segment for Hargreaves Lansdown in the past year, generating £260.7 million in revenue via net interest from customers’ investment account balances. The net interest margin, representing the difference between what was paid to savers and what was earned, stood at 2.1 per cent.

Interest in how platforms retain and pass on rates prompted the Financial Conduct Authority to canvass 42 firms in December 2023 about their treatment of interest on client cash. Hargreaves Lansdown maintains that the decision to introduce its savings offering was not driven by the regulator but by a desire to serve regular savers and those who are weary of continually chasing the top rates in the market.

Kate Steere of Finder UK commented that this latest step will unsettle the major high street banks, noting that the Hargreaves rate, while not market-leading, may appeal to those seeking steady returns rather than short-lived headline offers. Savers are still encouraged to compare widely, with some cash Isa rates elsewhere currently topping 4 per cent, even though they often diminish after the first year.

The move signals a bid to establish greater consistency and reliability for savers and underscores the growing competition in the sector, with traditional platforms angling for a share of the cash savings market.