Looking for a more competitive cash ISA? Here, we highlight 18 of the very best...
There are very few things in life (when it comes to money, anyway) that the taxman can’t get his grubby mitts on. And that’s precisely why I love cash ISAs – because they’re one of the few things that do fall into the tax-free category.
Unfortunately, interest rates on cash ISAs are not particularly inspiring right now. But at a time when saving can be a real struggle, knowing that you’re at least not having to pay tax on anything you do manage to save is a big advantage. What’s more, even though rates are low, you’ll still be able to earn a better return on your cash in an ISA than you would in an easy access savings account. You can read more about this in Cash ISAs are back on top.
So if you are looking to invest your money in a cash ISA, what are your options?
The best rates for easy access
If you'd prefer to be able to get your hands on your funds in an emergency without paying a penalty, your best option is to choose an easy access cash ISA.
The table below highlights the top eight easy-access cash ISAs available right now.
|
Provider and account |
Interest rate (AER) |
Minimum deposit |
Transfers in? |
Other conditions |
|
2.75% |
£9,000 (otherwise rate drops to 2%) |
Yes |
Rate includes 12 month bonus of 2.25% |
|
|
2.70% |
£500 |
Yes |
Rate includes 15 month bonus of 1%. Only operate by post |
|
|
2.70% |
£1 |
Yes |
Rate includes 12 month bonus of 1.70% |
|
|
2.70% |
£500 |
Yes |
Rate includes 12 month bonus of 1% |
|
|
2.67% |
£1 |
Yes |
Rate includes 1% bonus until 30/6/11. Must have Nationwide card account to open this ISA |
|
|
2.65% |
£1 |
Yes |
Rate fixed until 31/10/11 when rate falls to 0.50% |
|
|
2.60% |
£500 |
Yes |
Rate falls to 0.50% after 12 months |
|
|
2.60% |
£1,000 |
Yes |
Rate falls to 0.50% after 12 months. Only 4 withdrawals permitted in first 12 months |
Clearly the most competitive cash ISA in this table is the Santander Direct ISA issue 6 which offers a market-leading interest rate of 2.75%. But of course, the drawback to this account is that you will need to transfer in at least £9,000, otherwise the rate drops to 2%.
That said, if you don’t have £9,000 to invest, the Birmingham Midshires ISA Extra, the Cheltenham & Gloucester Cash ISA and the AA Access ISA are not far behind, offering an interest rate of 2.70%, with a smaller minimum deposit.
The advantage of all of these cash ISAs is that they allow transfers in – so if you already have a cash ISA with another provider, you’ll be able to transfer those funds across and this won’t eat into your annual allowance of £5,100 (providing the total investment limits are not exceeded).
Find out how to become a smart saver with a Cash ISA, and enjoy totally tax-free return.
Just bear in mind that like many easy access savings accounts, all of the cash ISAs in the table either have a 12 month bonus or the rate drops significantly after one year. So this means you will need to think about moving your funds elsewhere once that 12 month period is up if you want your savings to remain in a competitive account.
Fixed rate cash ISAs
If you’re after an even higher rate of interest on your cash ISA and you’re prepared to tie up your funds for a year or more, you could consider a fixed rate cash ISA instead.
The table below highlights some of the top fixed rate cash ISAs for terms between one and five years.
|
Provider and account |
Interest rate (AER) |
Term |
Minimum deposit |
Transfers in? |
|
3% |
1 year |
£1,000 |
Yes |
|
|
3% |
Until 31/12/11 |
£100 |
Yes |
|
|
3.30% |
Until 30/09/12 |
£100 |
Yes |
|
|
3.11% |
2 years |
£1,000 |
Yes |
|
|
3.75% |
3 years |
£1 |
Yes |
|
|
3.5% |
Until 15/09/13 |
£500 |
Yes |
|
|
4.25% |
4 years |
£500 |
Yes |
|
|
4.15% |
Until 31/08/14 |
£100 |
Yes |
|
|
4.25% |
5 years |
£500 |
Yes |
|
|
4% |
5 years |
£1 |
Yes |
Generally speaking, the longer you tie up your funds, the higher the rate of interest you will receive. That said, the interest rates on four and five year fixed rate ISAs are pretty similar.
It’s worth noting, however, that with certain fixed rate ISAs, once you’ve made your initial deposit, you won’t be able to make additional payments into the account. This applies to the Aldermore Fixed Rate Cash ISAs, Nationwide Cash Fixed Rate Cash ISA, Halifax Fixed Rate ISA Saver, and Principality BS Fixed Rate ISA, for example. The Northern Rock Fixed Rate Cash ISA only allows you to deposit additional funds for a period of 30 days. So check the terms and conditions carefully.
You also won’t be able to make penalty-free withdrawals with a fixed rate ISA.
Recent question on this topic
- mightywarrior1 asks:
I have just transferred some money from an old ISA to a new ISA, which offered a better rate of interest. My question is as follows: How long
- SoftwareBear answered "... should it take ? I believe it's 28 days before you can start complaining ... but it is highly..."
- MikeGG1 answered "There are new rules coming in at the end of the year, but they only restrict the time the old..."
- Read more answers
Finally, if you are thinking of choosing a fixed rate ISA, personally, I’d be a little reluctant to tie up my funds for four or five years. Interest rates may have shown little signs of activity recently, but it’s likely that they will increase over the next couple of years. And that means you might find that in four or five years' time, interest rates on cash ISAs may be far higher than they are now.
So if you’ve tied up your funds in a fixed rate ISA, you might find that what you thought was a competitive deal at the time, no longer is.
If you have an opinion on tax-free savings, why not start a discussion in the Grow your wealth group about it?
More: Six top savings accounts out now | Win more cash from Premium Bonds