ISA feature: M&S Bank's one-year fixed rate cash ISA
While instant-access cash ISAs are often the best option for savers looking for a flexible savings option, for those wishing to invest a lump sum a fixed-rate ISA is often the best bet as you could get a slightly better interest rate.
The financial arm of Marks & Spencer, M&S Bank, is offering a one-year cash ISA paying 1.85% with a minimum deposit of £500, but, as with any fixed-term bond, you can't make further contributions.
If you haven't used up your ISA allowance for the tax year already, you can put up to £5,640 in the account and with the interest rate fixed for the year, you will receive your return once the 12 months are up.
During the term you cannot make a partial withdrawal and there is a penalty charge of £50 if you withdraw the whole amount, so it is worth making absolutely sure you will not need to touch the money for a year.
The M&S account is available to open online, by phone and post, and can be accessed by phone and post. The account also allows transfers-in from older ISAs you might have.
Go to bank.marksandspencer.com for more information or call 0808 002 2222.
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.