Best cash Isa rates this week
Everyone aged over 16 can save up to £15,240 in an Isa during the 2015/16 tax year.
This means all interest you earn in your Isa is free of tax - so a cash Isa should always be the first home for your savings.
Which type of cash Isa do you need?
When picking an Isa, the first thing to decide is whether you want to fix your interest rate or opt for more flexibility with a variable rate.
If you want to secure the interest rate you earn on your savings, and are happy to lock your money away for a set period of time, then a fixed-rate Isa might be for you.
However, if you want to make additional deposits beyond the upfront opening deposit, or make withdrawals, then a variable-rate Isa with easy access is probably more suitable.
EASY ACCESS ISAs
- Nationwide pays 1.6% AER on balances between £1 and £15,240 on its Flexclusive Isa but you’ll need to be an existing customer. You can transfer money in, and the account can be managed either in-branch or online.
- Virgin Money Defined Access e-Isa (Issue 3) pays 1.56% AER if you don’t need frequent access to your savings. The interest rate will drop to 0.75% if you make more than three withdrawals in a year. The account is available online, and you can open the account with a pound. Transfers are accepted, and there’s no maximum balance.
- Punjab National Bank Variable Rate Cash Isa pays 1.65% AER but you’ll have to open and manage the account in branch and its network is limited. The minimum deposit is a pound and transfers are accepted from other cash Isas.
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NOTICE ACCOUNTS ISAs
- Clydesdale Bank Cash Isa 40 Day Notice pays a bonus-free 2% AER on balances over £24,000 but does not accept transfers in so you won’t receive the full 2% unless you split your deposit across two Isa seasons. You’ll get 1% interest between £500 and £9,000, and 1.5% interest between £9,000 and £24,000. It can be run online, over the phone or in branch. The same terms are available with Yorkshire Bank too.
- Bank and Clients’ Cash Isa pays 1.75% AER on balances over £20,000 and 1.5% on balances between £25 and £20,000. Again, you won’t be able to transfer in so you’ll only be able to get 1.5% in your first year even if you deposit your full Isa allowance. Accounts must be managed by post, but can be opened in branch too. You’ll need to give 60 days’ notice to withdraw, or you’ll forfeit 60 days interest.
- National Counties Building Society 3rd Issue 45 Day Notice Cash Isa pays 1.6% AER on balances greater than £30,000, 1.45% on balances above £15,000 and 1.3% on balances exceeding £3,000. This account can be opened online, by phone, post or in branch and transfers are permitted.
FIXED RATE ISAs
- United Bank UK’s 5 Year Fixed-Rate Cash Isa pays 2.55% AER on balances over £2,000, fixed for 60 months. You can transfer balances in, but you’ll need to do so immediately after opening an account. You can open an Isa in branch or by post, and once you’ve done that you can also manage transactions online.
- Virgin Money Fixed-Rate Cash e-Isa (Issue 148) offers a rate of 2.51% AER on minimum investments of £1. The Isa can be accessed online only. Transfers in from other Isas are accepted within the first 30 days of opening an account.
- Julian Hodge Bank Fixed-Rate Isa pays 2.50% AER on minimum balances of £5,000. The Isa can be managed in branch, or by post. Transfers in are accepted and there’s no maximum balance.
THREE / FOUR YEAR
- United Bank UK has a four-year fixed-rate account that pays 2.3% AER. You can open an account in branch or by post, and once it’s set up you can manage it online too. You can transfer money in from other Isas when you open the account, and there’s a minimum balance of £2,000.
- If you’re an existing customer, the Punjab National Bank pays 2.35% AER on balances between £1,000 and £15,240, fixed over four years. Alternatively, you can lock in for three years at 2.3%. You’ll have to be an existing customer and accounts have to be opened in branch. You can transfer in money, but you’ll need to be wary of the upper limit.
- Principality’s 3 Year Fixed Rate Cash Isa pays 2.2% AER on balances between £500 and £2,000,000. There’s no early withdrawals, but you can close the account if you forfeit 270 day’s interest. It’s available online and in-branch.
- Coventry Building Society’s Fixed Rate Issue (maturity date 30.11.17) pays 2.05% AER on balances over a pound. You can’t withdraw money early, but you can close the account if you forfeit 120 days’ interest. It’s available online, in branch, by phone and by post.
- AA Savings 2 Year Fixed Rate Isa (Issue 2) pays 2.01% AER on balances over £500 You’ll have to close the account and forfeit 6 months’ interest to access your money early. . It’s online only and you can transfer other Isa savings into the account.
- Shawbrook Bank’s 9th Issue 2 Year Fixed Rate Cash Isa pays 2% AER on balances between £5,000 and £250,000. Inbound transfers are permitted, and it’s online only. You’ll forfeit 180 days’ interest to close the account early.
ONE YEAR/18 MONTHS
- Shawbrook Bank’s 1 Year Fixed Rate Cash Isa Bond (Issue 11) pays 1.95% AER on balances between £5,000 and £250,000. Transfers are accepted, but must be requested with the initial application. The account must be opened online.
- AA savings 1 Year Fixed Rate Isa (Issue 2) pays 1.76% AER, fixed for 12 months. The minimum balance is £500 and there’s no limit on the amount you can transfer in.
- Tesco Bank’s Fixed Rate Isa is one of a few that pays 1.75% AER. We rank it highest as there’s no upper balance and it accepts transfers. It’s available online and over the phone.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.