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The ISA deadline is edging nearer, but going for one of these deals will secure you the best rates around.
The clock is ticking. There’s less than a fortnight left of the ISA season as the financial year comes to a close. So if you fancy getting a great return on that little nest-egg you’ve built up, without the taxman taking a slice, then that money should be heading into an ISA.
And as with all savings accounts, the best deals can be secured by putting that money out of reach for a longer period. ISAs are no different in that respect, but is it worth committing to a longer term, fixed-rate deal, rather than an easy access ISA?
Let’s take a look at the best rates in each timescale.
Locked up for 12 months
The top rate of interest that you can get on a one-year fixed rate ISA is 3%, which is available from four separate providers, though the features of the deals do vary.
What you should consider before going for your first account
Firstly, you can head to Cheshire Building Society if you live in the area, as the account is only operated in branch or by post. It also requires a minimum investment of £1,000. However, it is a good bet if you are a previous user of ISAs, as it does allow transfers in.
Alternatively, you might prefer Mansfield Building Society. Again, this is only operated in branch or by post, though this is very much an account for first time savers, with a minimum investment of £500 and no transfers allowed in.
A third building society, this time Ipswich, also offers 3%, and can be opened from just £100. While it allows transfers in, it can again only be operated in branch or by post.
The final option at 3% comes from the Post Office. Not only can it be opened for the relatively small sum of £500, it also allows transfers in, while it can be operated by telephone as well as by post, making it my favourite of the lot.
The not so terrible twos
If you would prefer to put that money aside to make tax-free returns for two years, the top option comes in the form of the Halifax Fixed Rate ISA, offering a return of 3.50%.
This fixed rate ISA can be opened for just £500, while it is the easiest best buy account to manage so far, as you can operate it in branch, over the phone and over the internet. It’s also a cracking option for regular ISA users as it allows transfers in.
All in all, a blinding option, and far better than its rivals.
A three year affair
If you are happy to put your cash aside for three years, the rate of interest really jumps sharply.
The market-leading ISA comes from Nationwide, which offers a whopping 4.40%. This account is a great option for new and seasoned savers alike, available from just £1 and allowing transfers in. Operating the account is a bit of a pain in that it can only be done in branch, though with 750 Nationwide branches across the country it shouldn’t be too difficult to find one.
The next best option comes from Marks & Spencer, paying a respectable 4%. This is available to borrowers with as little as £500, and accepts transfers in, though it can only be managed by post or over the telephone.
Fixing for the long term
If a three-year deal doesn’t strike you as quite long enough, you do have one five-year fixed rate ISA which you can go for, from Leeds Building Society.
The product pays an attractive rate of interest at 4.60%, it can be operated in branch or by post, and can be opened with as little as £1. However, personally, I just don’t see the value in locking your money up for quite this long - who knows what rates you could get on an ISA in three years, let alone in five years’ time?
The chopping and changing approach
However, do you really get a better deal by locking your money away?
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See the guideOK, so with a fixed rate ISA you have the guarantee that the rate will stay consistent over the term, but with the Santander deal you have the guarantee that it will track Bank Base Rate plus 3% for the first 12 months, so if anything it offers even better value, for a year at least.
Anyway, when it comes to things like ISAs I’m very much of the mentality that, for now anyway, it’s much better to stick to shopping around year by year.
Transfer deadline day
That argument is only helped by the significant growth in the number of cracking ISAs that allow transfers in.
You now have 272 different ISAs to choose from if you are transferring money in from a previous ISA, a rise of a massive 50%. And as more and more ISAs open themselves up to transfers, the case to avoid locking yourself in for the long term, and instead switch to a better deal each year becomes even more compelling.
While you can get a higher rate if you commit to a longer deal now, rates are likely to look even better next year, once Bank Base Rate starts to head north, so I’d be more inclined to stick with an easy access deal.
Having said that, if you really don't have the time or inclination to keep monitoring the rate you are earning on your savings, a fixed rate ISA may be a perfectly suitable choice for you.
If you need more help on deciding whether to fix your rate or try your luck with an easy access account, don't forget you can ask the lovemoney.com community what they think using our fantastic Q&A tool.
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