Neil Faulkner compares cash ISAs with savings accounts, fixed and variable rates, instant-access products and one-year bonds.
It's been about a month since we updated you on the best cash ISA rates. I'd like to try it a little differently this time, by attempting in a single table to mingle, and order sensibly, cash ISAs, savings accounts, fixed and variable rates, instant-access products and one-year bonds.
The idea is that you can see at a glance where you'll get the best return, and get a feel for how the top ISAs and savings accounts compare at present.
To do this properly, I'll include interest rates for both basic-rate and higher-rate taxpayers.
Let's look at how the top eight products on the market -- including cash ISAs and savings accounts -- compare:
Top eight products ordered by highest gross/AER interest rate
| Product name | Interest rate* | Fixed or variable? | Min/max investment | Notice period for withdrawals |
|---|---|---|---|---|
| Birmingham Midshires 1 Year Fixed Rate ISA | 4.2% | Fixed | £500/£39,600 | One year. (Earlier access with 90 days loss of interest.) |
| Julian Hodge Bank 1 Year Fixed ISA | 4% | Fixed | £3,600/£39,600 | One year. (Earlier access subject to an exit fee.) |
| Leek United BS Cash ISA | 3.75% | Variable | £1/£39,600 | Instant access. |
| Scottish Widows E-Cash ISA | 3.6% | Variable | £10/£39,600 | Instant access. |
| ICICI Bank HiSAVE Fixed Rate Savings Account | 4.65% AER 3.72% BR 2.79% HR | Fixed | £1,000/No max | One year. |
| Anglo Irish Bond Savings Account | 4.6% AER 3.68% BR 2.76% HR | Fixed | £500/ £2,000,000 | One year. (Earlier access for emergencies with 60 days loss of interest.) |
| ING Direct Savings Account | 4% AER 3.2% BR 2.4% HR | Variable | £1/ £1,000,000 | Instant access. |
| Akbank AK Savings Account | 4% AER 3.2% BR 2.4% HR | Variable | £1/£250,000 | Instant access. |
Data from Moneyfacts, our savings search, the providers' websites, and my own meanderings around the Web.
*Where just one figure is shown, this is both the gross and net interest rate, as well as the AER, regardless of what your top rate of tax is. Where there are three figures, the first is gross/AER, the second reflects what basic-rate taxpayers will receive after tax is deducted (BR), and the third is for higher-rate taxpayers (HR).
It's not normal to compare everything in one table like this, but I think it works. I've chosen the top two of each type of account, and I've ordered the list by gross/AER. (That is the interest you receive before tax. ISAs are tax-free, so it's also the net figure as well.) It's interesting to see the pattern:
The top two are ISAs with fixed interest rates for one year.
The next two are ISAs with variable interest rates and instant access. Currently there are no instant-access ISAs with fixed rates available to new customers.
The next two are savings accounts with fixed interest rates for one year.
The last two are savings accounts with variable interest rates and instant access. Currently there are no instant-access savings accounts with fixed rates available to new customers.
ISAs are the clear winners.
I've excluded all the accounts with onerous conditions attached, and regular saver accounts. This means the products in my table are suitable for people with lump sums to save. All the ISAs in the table happen to allow transfers in, so I haven't bothered with a column for that.
Some of the variable accounts have a twelve-month bonus. I mention that because this bothers some readers, but as the bank can reduce the underlying rate at any time it darn well pleases, I don't see that it matters. Plus, most accounts don't remain best buys for longer than a year regardless of whether they offer a bonus, so you'll need to switch then anyway if getting a good return is important to you.
Birmingham Midshires' ISA is the clear winner for all taxpayers if you can keep your money tied up for a year and you, like me, believe that interest rates will only go downwards this year. If you need quick access to your money, Leek United's ISA is the best I could find.
For non-taxpayers, ICICI's savings account is best if you can save for a year, and if you're choosing merely by interest rate. If you need ready-access then Leek United's ISA is perhaps for you.
In terms of the interest rate, savings accounts might sometimes win. However, you should always consider ISAs first to use some of your allowance for the year, which you'll lose after April. Once you've got the tax-free savings in an ISA, it'll remain tax-free for as long as you keep it there.
Top Tips:
- Do your research! Consider alternative places to save by reading Five More Places To Put Your Savings.
- Save more with our money-saving tips articles.
- Read about saving for children, who can often earn more than us!
Compare savings accounts to find the best rate!