ISA season 2013: The top 20 fixed rate cash ISAs

Saturday, 30 March 2013 12:18

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The ISA deadline is nearly upon us and with just three weeks to go before the deadline of April 5th 2013, we look at the best fixed rate cash ISA deals available for you to stash your cash away from the taxman.

The limit for tax-free ISA subscriptions is £5,640 for this tax year or £11,280 if you put your money into an investment ISA. Alternatively, you can put £5,640 into both a cash ISA and an investment ISA, but you can only put in £5,640 into a cash ISA.

If you have the money to put away, finding a healthy return is proving difficult this year. As explored in our feature on the top ten easy-access cash ISAs earlier this week, the Bank of England’s £80 billion Funding for Lending Scheme (FLS) has decimated savings rates since it was introduced in August 2012 making it almost impossible to beat inflation (the current rate of the consumer prices index is 2.7 per cent) without locking your money away for a number of years.

Bank of England base rate

Savings rates are close to their historical lows because as well as the FLS, base rate has been at a record low of 0.50 per cent for four years now. The rate is used as a starting point for the rates attached to financial products such as mortgages and savings accounts.

With the economy still struggling base rate is unlikely to change anytime soon. No economists are predicting it to rise before the end of 2014 and it could stay at this level for even longer.

In terms of fixed rate cash ISAs, this is not good news. Normally fixed rate ISAs pay more than easy-access cash ISAs, but in the run up to the deadline this year, the best one-year fixed rate cash ISAs are paying less than the top easy-access cash ISAs.

Fixed rate cash ISAs

Fixed rate deals guarantee to keep the advertised rate for the length of the term of the deal. However, instant-access cash ISAs have the advantage of allowing the investor to be able to get at their funds if required. 

Richard Lloyd, from consumer organisation Which? said: "Usually, you can get much better rates by locking your money into a fixed-rate account, rather than putting it in one that you can access instantly.

"But check if there are penalties for withdrawing your money early and keep an eye on what happens to the interest rate when your deal comes to an end."

The longer the term you take out the fixed rate deal, the higher the interest rate you should be able to get. However, because base rate is unlikely to change for at least two years and possibly longer, savings providers have factored this into the rates available on all types of fixed rate cash ISAs.

This means that in effect there is not that much difference in rates available over two or five years, so it is probably not worth tieing your money up for five years. The top rate on a two-year fixed rate cash ISA is 2.80 per cent from Santander. This is just 0.30 per cent less than Halifax's best-buy five-year fixed rate ISA at 3.10 per cent.

To illustrate this, just take a look at the best deals available in the run up to the ISA deadline last year. The top one-year fixed rate cash ISA deal from Santander paid 3.50 per cent, the best three-year deal from the Halifax paid 4.25 per cent and the top paying five-year deal from the Halifax paid 4.50 per cent.

This year, as you will see, the equivalent rates for the best deals are down by between 1.0 and 1.5 per cent.

Of course, there are still a few weeks to go before the deadline but it is extremely unlikely that the best rates will go up significantly. However, there could be slight improvements, so keep this page bookmarked as we will update it until the deadline of April 5th. One point to note is that most of these accounts could be withdrawn at any time, so if you like the look of one then apply for it.

Here is the run-down of the 20 best fixed rate cash ISA deals for 2013, with several options for each term that you might want to invest for. 

One-year fixed rate cash ISA

Metro Bank – Its one-year fixed rate cash ISA tops the charts paying 2.25 per cent. The minimum investment is £1 and transfers are allowed but withdrawals are not.

Skipton BS – Its one-year fixed rate ISA pays a rate of 2.10 per cent. It accepts transfers-in and the minimum investment is £500.

Derbyshire BS – The Derbyshire is one of five providers offering the next best rate of 2.05 per cent. Transfers in are allowed and the minimum investment is £100.

Dunfermline BS – Its fixed rate cash ISA Issue 53 pays 2.05 per cent and requires a minimum investment of £100. Transfers in are allowed and withdrawals are permitted subject to the loss of 60 days interest.

Tesco Bank – Its one-year fixed rate cash ISA also pays 2.05 per cent. Transfers in are not permitted and you have to pay in all the money you want to invest within 30days of opening the account. If you wish to withdraw your money you have to close the account and you lose 30 days interest.

Two-year fixed rate cash ISAs

Santander – Its two-year fixed rate deal is the best on offer and is even better if you hold a Santander 123 current account or cashback credit card. It pays 2.80 per cent to new customers but pays 3.0 per cent to holders of these products. Even better, if golfer Rory McIlroy wins one of the four major titles in 2013 then the product pays out an extra 0.1 per cent bonus. Savers benefited last year when he won the US PGA in August 2012. This ISA accepts transfers in.

Halifax – Halifax have a two-year fixed rate cash ISA available that pays 2.50 per cent. The minimum investment is £500. No withdrawals are allowed but transfers in are permitted. Account holders also qualify for the Halifax savers prize draw where each month three prizes of £100,000 are available.

Derbyshire BS – This is the first of four two-year fixed rate ISA deals that now pays 2.50 per cent with the same four providers all upping their rates by 0.15 per cent, excluding Tesco Bank, who followed the Metro Bank as the best deal on one-year options and there is nothing to choose between them. Transfers in are allowed and the minimum investment is £100.

Dunfermline BS – Its Fixed Rate Cash ISA Issue 54 now pays pays 2.50 per cent and requires a minimum investment of £100. Transfers in are allowed and withdrawals are permitted subject to the loss of 60 days interest.

Cheshire BS – Its two-year cash ISA deal also pays 2.50 per cent and the minimum investment is £100. You can only pay in a one-off lump sum. Transfers in are allowed but no partial withdrawals can be made and closure of the account means you lose 180 days’ interest.

Nationwide – Its two-year fixed rate ISA also pays 2.50 per cent. It can be opened with just £1. You can only pay in a one-off lump sum. Transfers in are allowed but no partial withdrawals can be made and closure of the account means you lose interest.

30-month fixed rate cash ISA deal

Nationwide – Nationwide has an exclusive deal available for existing customers with a maturing Nationwide fixed rate cash ISA – Its 30-month deal offers a rate of 2.80 per cent

Three-year fixed rate cash ISA deals

Halifax – Halifax lead the way here with a rate of 3.0 per cent. The minimum deposit is £500 and this has to be paid in one deposit. No withdrawals are allowed but transfers in are permitted. Account holders also qualify for the Halifax savers prize draw where each month three prizes of £100,000 are available.

Cheshire BS  – Cheshire BS three-year fixed rate ISA now pays a rate of 2.80 per cent. However, you can only make one deposit and withdrawals are subject to penalty.

Leeds BS – Leeds BS offers a rate of 2.60 per cent and allows access to 25 per cent of the funds without penalty, although the amount you withdraw will lose its tax-free status.

Four year fixed rate cash ISA deals

Halifax – Halifax again tops the best-buy tables for this length of term fixed rate cash ISA with a rate of 3.05 per cent. The minimum deposit is £500 and this has to be paid in one deposit. No withdrawals are allowed but transfers in are permitted. Account holders also qualify for the Halifax savers prize draw where each month three prizes of £100,000 are available.

Cheshire BS – This one pays 3.0 per cent. Interest is paid annually and any withdrawal is subject to the loss of 320 days interest. You can only make one initial deposit

Nationwide – Nationwide's four-year fixed rate cash ISa also pays 3.0 per cent. It is only available to Nationwide customers who have a maturing fixed rate cash ISA with Nationwide. No access is allowed without penalty.

Five-year fixed rate cash ISA deals

Halifax – Halifax again tops the best-buy tables for this length of term fixed rate cash ISA with a rate of 3.10 per cent. The minimum deposit is £500 and this has to be paid in one deposit. No withdrawals are allowed but transfers in are permitted. Account holders also qualify for the Halifax savers prize draw where each month three prizes of £100,000 are available.

Virgin Money – Its fixed rate cash ISA pays 2.75 per cent and can be opened with just £1 and transfers in are allowed.

*Article updated on 30th March 2013

Free guide to ISAs

 

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