Best cash Isa rates this week
The personal savings allowance means basic rate taxpayers can earn £1,000 interest tax free without using their Isa, and people who pay the 40% rate can get £500.
But remember that wrapping your money in an Isa means you won't need to worry about a future tax bill because your savings pot has grown and you're earning more than the tax-free threshold.
Everyone aged over 16 can save up to £15,240 in an Isa during the 2016/17 tax year. This allowance will increase to £20,000 in the 2017/18 tax year.
The main reason not to use an Isa for your savings is if doing so will eat into the amount you could put into an investment Isa, where the tax relief could save you far more tax, as your investments are likely to grow faster.
EASY ACCESS ISAs
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 make additional deposits beyond the upfront opening deposit, or make withdrawals, then a variable rate Isa with easy access is probably most suitable for you.
Paragon Bank Limited Edition Easy Access Cash Isa 1.05% AER
Accounts can be opened with £1, up to £100,000. The account is available online only. Transfers in from other cash Isas are permitted.
Virgin Money Defined Access e-Isa 1.01% AER
This account accepts transfers in from other accounts but you can only operate the account online. You're also limited to three withdrawals per calendar year. Minimum balance is £1.
NS&I Direct Isa 1% AER
This account pays on balances over £1. There’s no limit to how much you can put in the account (subject to the annual subscription limit), and the full balance, not just the first £85,000, is fully guaranteed by the Treasury. The account is available by phone and online. Be aware that this rate will reduce to 0.75% on 1 May 2017.
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.
Teachers Building Society 90 Day Notice Cash Isa 1.05% AER
This pays 1.05% on balances over £100. You can deposit up to £100,000 but it is only available by post.
Family Building Society 35 Day Notice Isa 1.05% AER
This pays 1.05% on balances over £30,000, with no upper limit. It’s available in branch, by post or online. The minimum balance is £3,000.
Principality Building Society Promise Isa 0.9% AER
The 30 day notice account includes a bonus of 0.50% which is payable as long as you don’t make more than two withdrawals during the tax year. The minimum balance is £500. Transfers in from existing Isas are permitted. Account is only available in branches, which are located across Wales and around the English/Welsh border.
FIXED RATE ISAs
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.
Virgin Money Fixed Rate Cash Isa (Issue 254) 1.05% AER
Available for balances between £1 and £2 million. It’s available by post, phone, online or in branch. You can transfer money from other Isas, but be aware this can only be done within 30 days of account opening.
Bank of Cyprus UK One Year Fixed Rate Isa 1.05% AER
Can be opened with £500 and transfers from other Isa providers are accepted. Rate is fixed for 12 months and the account is online only. Savings here receive the full £85,000 FSCS protection.
Leeds Building Society One Year Fixed Isa (Issue 92) 1.01% AER
This Isa is fixed until 28 February 2018. The minimum opening deposit is £100 and you are permitted to transfer existing Isa cash. The account can be opened in branch, by post or online. Withdrawals are allowed but there is a hefty penalty charge of 60 days' interest.
Aldermore Two Year Fixed Rate Cash Isa 1.2% AER
Our best buy comes from Aldermore. This offers a 1.2% rate on balances between £1,000 and £500,000. Account can only be opened online and any transfers from other Isas must be done when the account is opened.
Virgin Money Virgin Fixed Rate Cash ISA (Issue 253) 1.15% AER
This product offers a 1.15% rate, fixed until February 2019. The account can be opened in branch, online, over the phone or by post with as little as £1.
Principality Building Society Three Year Fixed Rate Isa (Issue 166) 1.3% AER
This offers a rate of 1.3%, fixed for three years, on balances of more than £500. Operated in branch, by phone and online.
Paragon Bank Three Year Fixed Rate Isa 1.3% AER
This three year fix offers a rate of 1.3%. This account can only be opened online for balances between £500 and £100,000
Virgin Money e-Isa (Issue 217) 1.25% AER
Interest rate is payable on balances from £1, fixed until 24 January 2020. You can transfer in Isa balances from existing accounts within 30 days of opening the Isa with Virgin Money. Be aware that this account is only available online.
Aldermore Three Year Fixed Rate Isa 1.25% AER
This deal lasts for three years from the date of opening. This must be opened online but can be managed by post or phone thereafter.
Virgin Money e-Isa (Issue 226) 1.65% AER
The top pick on the high street comes from Virgin Money This account is available online only and allows transfers in from existing Isas. Minimum balance is £1.
Paragon Bank Five Year Fixed Rate Isa 1.6% AER
This five year fix offers a rate of 1.6%. This account can only be opened online for balances between £500 and £100,000
Principality Building Society Five Year Cash Isa 1.55% AER
For this account you need to deposit at least £500, and there’s no maximum balance. The account is available in branch, online and over the phone.
Coventry Building Society Junior Cash Isa 3.25% AER
Accounts can be opened with a pound in branch, online or by post. Interest is paid annually on 30 September.
Nationwide Smart Junior Isa 3% AER
Also pays 3% AER. Again, the minimum opening balance is £1. It’s only available in branch. Interest is paid annually on 31 October.
Halifax Junior Cash Isa 3% AER
Transfers in are accepted and the minimum balance is £1. It’s only available in branch.
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HOW ARE THESE PRODUCTS PICKED?
We look across as much of the of the savings market as possible to find the best deals using industry data from Defaqto.
All our picks are nationally available. We try and pick products that are available to both new and existing customers, but we’ll highlight some offers for existing customers if they’re much better than what else is on offer.
Unless rates are significantly higher than on other accounts, we avoid products that pay an initial bonus (which is normally a euphemism for a rate cut after 12 months), or those with tiered rates (these may not pay the advertised interest rate if your balance rises above or falls below a set amount).
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.
We will never include a savings account that isn’t covered by a European deposit protection scheme.
To see all the savings accounts we consider, visit our savings and Isa comparison tools.
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.