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, and again in the 2016/17 tax year.
The benefit of an Isa is that all the interest you earn is free of tax, which is why it should usually be your starting point for 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, 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.
If you're looking for a savings account to save a deposit for your first property, you might be benefit from a Help to Buy Isa. See our top Help to Buy Isas guide.
EASY ACCESS ISAs
- 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 £1, with no maximum, and transfers are accepted from other cash Isas.
- Virgin Money’s Defined Access Isa pays 1.51% AER on balances between £1 and £2,000,000. However, you’re only allowed up to three withdrawals a year. Take out money more often and the interest rate will drop to 0.75% AER. The account is available in branch, online, by post or by phone.
- The Coventry Building Society Easy Access Isa pays 1.5% AER on balances of £1 or more. Transfers are accepted from other Isas. The account is available in branch, online, by post and by phone.
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NOTICE ACCOUNTS ISAs
Notice accounts need you to plan withdrawals in advance, but the rates are slightly higher than instant access in return. Be aware these products are more likely to offered tiered rates, so the interest you get depends on your account balance.
- 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. Instead, you'll get 1% between £500 (minimum deposit) and £9,000, and 1.5% between £9,000 and £24,000. You can open an account online, by phone, by post or in branch, but you’ll have to manage the account in branch or by post. 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 1.75% if you subscribe to this Isa over two years. 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 between £15,000 and £30,000. and 1.3% on balances between the £3,000 minimum balance and £15,000. This account can be opened online, by phone, post or in branch and transfers are permitted.
FIXED RATE ISAs
- The State Bank of India pays 2.6% AER on balances upwards of £5,000, fixed for 60 months. It’s only suitable if you can leave your money alone for five years, as the only way out early is to close the account, which will cut the interest rate to 1.6% AER, and you’ll also forfeit 30 days’ interest. It’s only available online. Though this bank is less well known, it has its own banking licence, so deposits up to £75,000 are protected in full by the FSCS.
- 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. Accounts are covered by the Financial Services Compensation Scheme (FSCS), so deposits up to £75,000 are guaranteed by the government.
- Principality's Five Year Fixed-Rate Isa pays 2.50% AER on balances worth more than £1,000. The Isa can be managed in branch, online, or by post. Transfers in are accepted and there’s no maximum balance.
THREE / FOUR YEAR
- 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 can transfer in money, but you’ll need to be wary of the upper limit. This account is only available in branch.
- 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. Again, deposits are covered by the FSCS, and it’s available in branch or by post.
- The State Bank of India pays 2.3% AER on its three-year fixed bond, and you can deposit between £2,000 and £1,000,000. Accounts can be opened in branch or by post. No early withdrawals are permitted.
- The State Bank of India’s two-year bond pays 2% AER on deposits of £5,000 or more. Again, it’s online only, and you’ll be heavily penalised if you close the account early, with the interest rate falling by half, as well as losing 30 days’ interest. It’s online only, and the accounts are covered by the FSCS.
- United Bank UK’s 2 Year Fixed Rate Cash Nisa pays 1.95% AER on balances between £2,000 and £1,000,000. Transfers are accepted, but need to be arranged when opening the account. Early withdrawals and closures aren’t allowed.
- Punjab National Bank’s Two Year Fixed Rate Isa pays 1.9% AER on balances over £1,000, with no upper limit, subject to the annual Isa deposit cap. It’s online only and transfers from other providers are accepted. Early withdrawals aren’t allowed.
ONE YEAR/18 MONTHS
- The Bank of Punjab pays 1.75% AER on balances over £1,000. Transfers are accepted with no upper limit, though you’ll have to open the account in branch. No withdrawals are permitted.
- Virgin Money Fixed Rate Cash Isa (Issue 195) will pay 1.65% AER. You can deposit between £1 and £2,000,000, though to deposit more than £15,240 you’ll need to transfer an existing Isa balance. It’s available in branch, by post, online and by phone.
- Julian Hodge Bank Cash Isa 1 Year pays 1.6% AER. The minimum deposit is £5,000, with no upper limit. Balances can be transferred from other Isas. It’s available in branch, by post and by phone. Julian Hodge Bank has its own UK banking licence, and is covered by the FSCS.
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.
The Financial Services Compensation Scheme is the compensation fund of last resort for customers of authorised financial services firms. If a firm becomes insolvent or ceases trading, the FSCS may be able to pay compensation to its customers. Limits apply to how much compensation the FSCS is able to pay, and those limits vary between different types of financial products. However, to qualify for compensation, the firm you were dealing with must be authorised by the Financial Services Authority (FSA).
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.