We find the best tracker ISA, and the best fixed-rate ISAs that are protected in full by the UK's savings protection scheme.
In the middle of April, Jane Baker wrote about cash ISAs for the new tax year. You can read there about:
- The highest-paying ISA that doesn't allow transfers in (a variable easy-access ISA).
- The highest-paying regular saver account.
- The highest-paying fixed-rate account, which is fixed for five years.
- The highest-paying one-year fixed-rate account.
- The highest-paying ISA that allows transfers in (another variable rate, easy-access ISA).
I've been looking hard at the ISA market, considering different people's needs, so I'd like to add a couple more to the list:
A balance between a good rate and low maintenance
Jane already mentioned the highest-paying one-year fix. This earns you a reasonable rate (considering we currently have deflation - falling prices) for a decent period of time.
I wouldn't lock myself into a fixed deal for longer than a year, as interest rates could easily begin to rocket when the economy recovers. With that in mind, it's impossible to find anything that will give you an excellent rate for longer than a year, but I've found an ISA that should give you a decent rate for two years, and that is Nationwide's 2yr tracker ISA. You get 1.5% above the Bank of England's base rate, which means you'll currently earn 2%. The rate will be adjusted within 30 days of a base rate change, which is typical of a tracker product.
There are two downsides:
- If you close the account early you lose 30 days interest.
- You can't transfer other ISAs in. Nationwide tells me it's been overwhelmed with applications due to it being seen as safer than banks. That's why, it says, it's had to stop transfers in on most ISAs. It's slowly introducing them again, ISA by ISA. At present, if it did allow transfers in, it would pay 2% above the base rate for those who put in £25,000 or more. We'll have to wait and see.
This ISA will never be top of the table on rate alone, but it should remain somewhat above average during the first two years. If you're after a low maintenance ISA with reasonable rates, this is a good one. However, you will have to attend to it again in two years, so don't forget to make a note in your diary.
An alternative one-year fixed rate ISA
Jane mentioned the highest-paying fixed rate in her article. However, some of you might not be interested in that one on the grounds that the first £18,000, or thereabouts, is protected by Cyprus' savings protection scheme. The first €20,000-worth, minus 10% is paid to you by the island, rather than our own Financial Services Compensation Scheme (FSCS), which only covers the remainder up to £50,000.
Maybe in some ways that's lower risk, as your compensation is split between two compensation schemes. However, if you feel that Cyprus has a greater risk of being unable to compensate you, you'll probably want an alternative that is 100% covered by the FSCS.
The best that fits the bill is Birmingham Midshires' 1 Year Fixed Rate ISA, which pays 3.15%. The downside is that you can't transfer money in. You can invest £500 to £3,600 this year. You lose 90 days interest on any amounts you withdraw.
The best for those of you who want to transfer in is Bradford & Bingley's 1 Year Fixed Rate ISA, which pays 3%. There are around 20 providers offering a 3% fix currently, so perhaps more of them allow transfers in. I did, however, check the small print of about one-third and found none of those did.
> Compare ISAs through lovemoney.com
More: Open an ISA or you could lose £2,750! | How to pick the right Cash ISA for you