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.
Remember, savings with UK banks are covered by the Financial Services Compensation Scheme (FSCS), so deposits up to £75,000 with any institution are protected by the UK government. If two banking brands (for example, NatWest and RBS) share a banking licence, the £75,000 guarantee is shared across the two brands.
All these savings accounts are covered by the FSCS unless otherwise specified. If your bank is licenced by another European country, savings up to €100,000 will be protected, but by the government where the bank is headquartered, rather than the UK authorities.
EASY ACCESS ISAs
- Punjab National Bank Variable Rate Cash Isa pays 1.45% 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.
- M&S Bank’s Advantage Cash Isa pays 1.3% AER on balances over £1. There’s no upper balance limit. The account is available by post, online and by phone. Transfers in are accepted.
- First Direct customers can get 1.3% AER on balances over £1 with its Cash Isa. It’s available over the phone, by post and online. You can transfer money in, but not from a First Direct Isa.
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NOTICE ACCOUNT 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.
- Bank and Clients’ Cash Isa pays 1.75% AER on balances over £20,000 and 1.5% on balances between £25 (minimum deposit) and £20,000. 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 tax 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.
- Clydesdale Bank Cash Isa 40 Day Notice pays a bonus-free 1.75% AER on balances over £30,000 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 £15,000, and 1.5% between £15,000 and £30,000. 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.
- If you'd like to avoid a tiered account, Teachers Building Society’s Cash Isa Notice 90 (Issue 6) pays a no-nonsense 1.4% AER on balances over the minimum £100 deposit. The account is available by post or by phone. Transfers are accepted from other providers, but there is a £15,240 maximum balance. Early withdrawals will lose 90 days’ interest.
FIXED RATE ISAs
- Punjab National Bank’s 5 Year Fixed Rate Isa pays 2.5% AER, with a £1,000 minimum balance and no upper limit. No early withdrawals are allowed, but you can close the account early with 30 days’ notice. If you do, the interest rate will fall to 1.5%. Transfers are accepted.
- United Bank UK’s 5 Year Fixed Rate Isa pays 2.2% AER. You can deposit between £2,000 and £1,000,000. No early withdrawals are allowed, and you’ll lose a year’s interest if you close the account early. Accounts can be opened in branch or by post. Money can be transferred in.
- Halifax’s 5 Year Fixed Term Isa pays 2% AER. You need to deposit at least £500, and there’s a £9 million maximum balance. You can transfer savings from other Isas. It’s available in branch, by phone or online.
THREE / FOUR YEAR
- If you’re an existing customer, the Punjab National Bank pays 2.35% AER on balances over £1,000. Alternatively, you can lock in for three years at 2.3%. You can transfer in money from other Isas. This account is only available in branch.
- Julian Hodge Bank’s 4 Year Cash Isa pays 1.7% AER. There’s a £5,000 minimum deposit and no upper limit. You can transfer money from other Isas. The account is available in branch, by post and over the phone. Early withdrawals are allowed but will lose 6 months’ interest.
- Metro Bank will pay 1.5% AER if you are willing to lock your money away for three years. There’s no maximum balance and you will need at least £1 to open an account. You won’t be able to make early withdrawals, but you can close the account early, subject to losing 6 months’ interest. Accounts are available in branch, by post or over the phone. Unlike most fixed rate savings accounts, this one lets you add to your initial deposit.
- Punjab National Bank’s Two Year Fixed Rate Isa pays 1.9% AER on balances over £1,000 (minimum deposit), 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.
- Julian Hodge Bank’s 2 Year Cash Isa pays 1.5% AER with a £5,000 minimum balance and no upper limit. It’s available in branch or by post. Withdrawals aren’t allowed, and early closures forfeit 120 days’ interest.
- Save £1 or more with Coventry Building Society and you’ll get 1.5% AER, fixed until May 2018. No withdrawals are allowed, but you can close the account early by forfeiting 120 days’ interest. The account is available in branch, by post, by phone and online.
ONE YEAR/18 MONTHS
- Punjab National Bank pays 1.75% AER on balances over £1,000 (minimum balance). Transfers are accepted with no upper limit, though you’ll have to open the account in branch. No withdrawals are permitted.
- Tesco Bank’s Fixed Rate Isa pays 1.30% AER on balances over £1. There’s no upper limit to how much you can save and transfers are accepted from other Isas. The account is available over the phone or online.
- The Halifax Junior Cash Isa pays 4% AER if the parents have an account with Halifax, or 3% if they don’t. It’s only available in branch. Interest is paid annually on 5 April. The account is available in branch or online.
- Coventry Building Society’s Junior Cash Isa will pay 3.25% AER. Accounts can be opened with a pound in branch, online or by post. Interest is paid annually on 30 September.
- Nationwide’s Smart Junior Isa also pays 3.25% AER. Again, the minimum opening balance is £1. It’s only available in branch. Interest is paid annually on 31 October.
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
A savings account on which the account holder is required to give a period of notice before making a withdrawal or face a penalty, usually a loss of a specific number of days’ interest or pay a fee. Notice periods of 30, 60 or 90 days are common. These accounts usually pay higher than average interest rates and require large initial deposits (£1,000 minimum) so the notice period and penalties are there to discourage withdrawals. Some of these accounts will only allow a certain number of withdrawals a year.
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.