Isa rates are disappointingly low this year – it’s almost as if the banks don’t want your cash – so it’s more important than ever to do your homework to find a top-paying account.
The 5 April deadline is fast approaching and with Isas, it’s a case of use it or lose it, so if you haven’t made the most of your tax-free allowance yet, you need to act fast.
It’s also wise to use this as a prompt to make sure that your existing Isas are on the best possible rate, especially as sneaky banks and building societies let some legacy deals drift down to as low as 0.01 per cent interest.
To help you minimise time spent trawling through savings tables, the team at This is Money has picked our five top fixed rate Isa deals across a range of fixed rate terms.
Savers can currently get between 1.2 and 1.75 per cent for locking their cash away
Everyone over the age of 18 in the UK is entitled to put away up to £15,240 before the end of the 2016/17 tax year in April and earn interest tax-free.
Next tax year this allowance will rise significantly – from 6 April savers will be able to squirrel away up to £20,000 under the tax-free wrapper.
This doesn’t have to be new savings: you can also transfer existing Isa savings into a new account if the provider allows it.
Read more about transferring your Isa balance here.
Why fix your Isa?
Fixed-rate accounts currently offer higher rates than easy access Isas because they require you to leave your money untouched for the full term of the product.
Make sure you don’t need access to the money. If you need income from it you can interest paid to another account in many cases, if not you can roll it up within many fixed rate deals.
Here are our top five fixed rate accounts on offer at the moment. You can check our independent savings tables yourself here.
Newcastle Building Society currently offers the best one-year fix at 1.2 per cent.
It allows transfers in and can be opened online or in branch with an initial minimum deposit of £500.
At the end of the term the 1.2 per cent rate would earn you a total £182.88 on your full Isa limit of £15,240.
Saga has a one-year fix paying slightly less than the best buy at 1 per cent, but it comes with added flexibility.
Saga will charge you 90 days interest as a penalty for withdrawing any cash. However unlike most accounts, savers will be able to top up their account again after the new tax year starts on 6 April. This means you can withdraw and replace funds within the same tax year without affecting your annual Isa allowance as long as the Isa is still on sale.
You can open your account by phone or online with just £1, but it is only manageable by phone or by post. The account allows transfers in from an existing Isa.
After a year, £15,240 in the account would earn £153.10 in interest.
Newcastle Building Society currently pays the highest rate on a two-year fix at 1.3 per cent. While it’s the best rate you will find for the term, you are only earning 0.1 percentage point more for locking your cash away for an extra year.
You can open the account online, in branch or by post with a minimum of £500, but it only allows a maximum of £15,240.
At the end of the two-year period maxing out this year’s full Isa limit of £15,240 would earn you a total £401.22 in interest.
Challenger, Paragon Bank, takes the top spot when it comes to three-year fixed rate Isas at 1.4 per cent.
The account allows transfers in. It can be opened with a minimum deposit of £500 and allows balanced up to a maximum of £100,000 excluding interest.
Locking away this year’s full Isa allowance of £15,240 would earn you a total £653.32 over three years.
Paragon also beats the rest of the market when it comes to fixing for five years.
It pays 1.75 per cent. Again, while this is the top deal available for those wanting a long-term fix, thanks to rock bottom rates, returns are far from impressive.
You can transfer in from an existing Isa account. It requires an opening balance of £500 or more with a £100,000 account maximum.
After five years, a £15,240 balance would earn £1,392.52 interest.