Cheshire Building Society has just upped the rate on its 18-month Direct Fixed Rate ISA
from 3.7% to a whopping 4%
AER (although savers will actually earn 4.05% at the end of the 18 months), making it the current market leading account over this timeframe. Here, we take a closer look at the account to see if it could be the right choice for you…
What’s the deal?
Cheshire is now paying a massive 4% tax-free annual interest on its 18-month Direct Fixed Rate ISA which can be opened with a minimum investment of £1,000.
Its previous rate of 3.70% was already market leading, but the new higher rate pushes this account even further above the competition.
The account can be opened online and then managed by post. You must be aged at least 16 to open the account.
While this account cannot be beaten for anyone who is able to tie up their cash for 18 months, unfortunately it does not accept transfers from existing ISAs. That means anyone who prefers to keep their ISA savings in one place will need to look elsewhere.
You must open the ISA with the maximum amount you want to deposit, as you cannot make any further payments into the account at a later date. You cannot get access to your savings during the fixed rate term, so you must also be certain that you can afford to leave your money untouched for 18 months.
Savers can close the account early if they need to, but will lose 180 days’ interest, so this should only ever be a last resort.
If you don’t want to tie up your savings for 18 months, then take a look at the AA’s leading Access Cash ISA, which pays an impressive 3.50% AER tax-free. However, this rate incorporates a very steep 3.00% fixed 12-month bonus, so you will need to move your money after that time. The account requires a minimum investment of £2,500 and does not accept transfers in.
Alternatively Cheshire has also upped the rate on its Direct ISA. The deal, which offers savers instant access to their cash, now pays 3.35% (including a 2.35% bonus payable until September 2013).
This compares to the previous 3.16%, including a 2.16% bonus payable over the same period.
Cheshire’s 18-month Direct Fixed Rate ISA is a fantastic offer for savers wanting to invest this year’s allowance into a fixed rate account for the short to medium-term.
At eight times the current 0.5% Bank of England base rate, it is head and shoulders above the competition, although unfortunately, those looking to transfer existing balances won’t be able to benefit.
If you want to invest for bit longer, look at BM Savings launched a market-leading two-year deal on March 19, on which savers can earn slightly higher interest of 4.05% AER for a minimum deposit of £500. Savers will also be able to make transfers into the account from existing ISAs.
Santander’s Fixed Rate MAJOR ISA comes a close second, paying tax-free returns of 4% for two years. The account requires a minimum investment of £1 – plus a 0.10% bonus if golfing legend, Rory Mcllroy wins an eligible golf major before the account matures.
The market-leading one-year fixed rate ISA is from Aldermore, at 3.3% tax-free.
If you don’t use your cash ISA allowance by April 5, it will be gone forever, as you cannot carry it over to next year. If you have left it until the last minute to invest this year, make sure you use next year’s allowance as soon as possible after April 6, as this will enable you to earn an extra year’s interest.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.