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Now is the time to shop around for the best fixed–rate cash Isas, according to savings provider Investec, with savers still able to pick up deals above 4 per cent.
The government will slash the cash Isa allowance from £20,000 to £12,000 on 6 April 2027, so a one–year fix opened now will mature just ahead of this date.
But it pays to hunt down the best deal. The top rates on a one–year fix cash Isa reach 4.16 per cent, compared to the lowest at 3.15 per cent.
Someone who still has this year’s £20,000 allowance left to use will be over £200 better off next year by plumping for the top rate rather than the worst one.
The best cash Isa rates comfortably beat both inflation, at 3 per cent, and theBank of England base rate at 3.75 per cent.
David Hunt, head of deposits at Investec, said: ‘The countdown to the lower £12,000 cash Isa limit has started making it even more important that savers take the time to find the highest paying one–year fixed rate cash Isa.
‘The difference between the highest and lowest paying accounts is significant and savers will see the difference if they shop around for the best home for their money.’
> These are our five favourite cash Isas
Shopping around for the best rates can put more money in your back pocket
The top one-year fixed rate cash Isas
In return for locking your money away, fixed–rate Isas often pay you more interest than easy–access alternatives.
But the rise of 12–month boosted rates on easy–access Isas has complicated the landscape, with these often working out initially more lucrative than fixed deals.
Even though the underlying rate is usually variable, the boosted element is fixed – and this should mean that you comfortably beat the base rate over a year. However, with more Bank of England rate cuts forecast, underlying rates could fall and take the return below what a fix would deliver over a full year.
When choosing a cash Isa, consider whether you want to lock your money away for the certainty of a fixed rate – and the psychological effect of not being able to touch your funds – or whether you’d prefer flexible access to your money.
Investec offers a top rate of 4.05 per cent on its one–year fixed rate cash Isa, although this is beaten by deals from Close Brothers (4.11 per cent), Castle Trust Bank (4.15 per cent) and Chetwood Bank through Hargreaves Lansdown Active Savings (4.16 per cent).
Easy–access Isas with top 12–month boosts
Some challenger platforms offer 12–month boosts on easy–access Isas to encourage new customers to sign up.
If you haven’t exhausted all the options below, they could be more lucrative than the deals above. Bear in mind that while the boosts are usually fixed, underlying rates are variable.
Underlying rates often track the base rate, so you should still get a sense of how much you could earn over the year, factoring in predictions for how the base rate could shift.
The upstart savings and investing platform Prosper launched a cash Isa this week, with a best–buy interest rate of 4.5 per cent for new customers. This includes a 1.72 boost, with the underlying rate set at 1 per cent gross below the base rate.
It’s a flexible Isa, meaning you can withdraw money and replace it in the same tax year without reducing your Isa allowance.
Unfortunately Prosper doesn’t accept transfers at the moment, and you need a minimum of £10,000 to open an account.
Etoro boosts its interest rate by 1 per cent for 12 months, with its cash Isa currently paying 4.44 per cent. You need to open with £500, or transfer at least £15,000.
We like that it’s a flexible Isa, but we don’t like the fact that if you withdraw money more than three times in the year or let the balance fall below £500, Etoro punishes you by cutting your interest to 3.44 per cent.
The Isa is administered by the digital wealth manager, Moneyfarm, and your money is held in a qualifying money market fund (QMMF), which is a low–risk investment that meets strict regulations to be considered cash–like. The interest rate is linked to this investment, and is heavily influenced by changes to the base rate.
If you follow our link above, Trading 212 will boost your interest rate by 0.8 per cent for 12 months. We like that you can open it with just £1. You can transfer another Isa too, but the boost only applies to this year’s subscriptions.
This is a great flexible cash Isa with no penalties for withdrawals.
The underlying rate is currently set at 0.15 per cent below the base rate.
What about stocks and shares Isas?
The allowance for investing within a stocks and shares Isa will remain £20,000, so it’s worth considering how best to make use of this higher level.
You can read our guides to the best stocks and shares Isas and investing for beginners to get started.
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