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.
- National Savings and Investments' Direct Isa pays 1.5% AER on balances over a pound. Accounts can be opened and managed by phone or online. Transfers in are not accepted.
- Punjab National Bank Variable Rate Cash Isa pays 1.65% AER but you’ll have to open and manage the account in branch. 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. It can be run online, over the phone or in branch. There’s a £500 minimum deposit, and you’ll earn 1% interest between £500 and £9,000 and 1.5% interest between £9,000 and £24,000. The same terms are also available with Yorkshire Bank.
- Bank and Clients’ Cash Isa pays 1.75% AER on balances over £20,000 and 1.5% on balances between £25 and £20,000. You can’t transfer into the account, so if you’re opening an account you can’t receive the higher rate in the year you open an account 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’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. Transfers in are permitted and accounts can be opened online, by phone, post or in branch.
FIXED RATE ISAs
- Julian Hodge Bank Fixed-Rate Isa pays 2.55% AER on minimum balances of £5,000. The Isa can be managed in branch, or by post. Transfers in are accepted.
- Virgin Money Fixed-Rate Cash e-Isa (Issue 134) 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.
- Punjab National Bank’s 5 Year Fixed Rate Isa pays 2.5% AER on balances over £1,000, but you’ll need to be an existing customer to get one. Accounts have to be opened in branch, and in-bound transfers are accepted.
THREE / FOUR YEAR
- Virgin Money Fixed-rate e-Isa (Issue 135/160) pays 2.25% AER until September 2018. The minimum deposit is £1 and the account has to be managed online. Inbound transfers are permitted.
- 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.
- Julian Hodge Bank Cash 4 Year Isa offers 2.15% AER on minimum deposits of £5,000. Transfers in are accepted and the Isa can be managed in branch, by post or over the phone.
- Shawbrook Bank’s 3 Year Fixed-Rate Isa pays 2.1% AER on balances over £500. You can transfer in within a month of opening an account. Accounts can be opened in branch, by post or online.
- Halifax Isa Saver Fixed pays 2% AER. The Isa can be accessed online, in branch or over the phone. Transfers in are allowed. The minimum deposit is £500 and the maximum is £9,000,000.
- Skipton Building Society 2 Year Fixed-Rate Isa pays 2% AER. There’s a minimum deposit of £500 (max: £1,000,000) and the account can be opened online, by post or in branch. Transfers in are accepted.
- Shawbrook Bank 2 Year Fixed-Rate Isa pays 2% AER for 24 months. There’s a minimum deposit of £500 and the maximum is £250,000. You can open the account in branch, by post or online.
ONE YEAR/18 MONTHS
- Nottinghamshire Building Society Starter Isa pays a whopping 3% AER on balances between £10 and £15,240. You can’t transfer in, and you’ll have to open the account in branch.
- Julian Hodge Bank will pay 1.75% AER on balances over £5,000 through its one year fixed rate Isa. You can open the account in branch, over the phone or by post and in-bound transferred are allowed.
- Shawbrook Bank Fixed-Rate Cash Isa Bond (Issue 7) pays a rate of 1.75% AER on minimum balances of £5,000. Transfers in are allowed. Transactions can be made online only.
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.