Focus on: Tax-free savings at 2.1%, fixed for two years

There’s a double whammy of good news for savers this week as, not only can you now save up to £15,000 tax-free with the launch of the New ISA (NISA), but a raft of brand new market-leading deals have hit the market too.

If you are looking to hedge your bets by tying your cash up for the next two years, Virgin Money has launched a Fixed Rate E-ISA which pays 2.10% tax-free.

It might not sound like a huge amount, but it’s a lot better than the next like-for-like two-year ISA deal (from Principality BS, paying 1.85%).

And the good news is, even if you want to fix in for less or more time, or keep access to your cash with a variable rate NISA, there’s new leading deals in those camps too. Read on to cash in...

What’s the deal?

With effect from July 1, you can save up to £15,000 into a cash New ISA (NISA) this tax year – up from just £5,940 prior to this date.  And Virgin Money has introduced a new range of fixed rate and easy access cash ISAs to coincide with these changes.

Like its other offerings, Virgin’s new two-year Fixed Rate E-ISA, paying an annual equivalent rate (AER) of 2.10% is market-leading – so you won’t find a higher rate for that timeframe elsewhere.

The account also stands out for its ease and transparency. It can be opened with just £1, anyone can apply AND it allows transfer in from previous years’ ISAs – great news if you have money languishing in ISAs paying bad returns.

If you invest the maximum £15,000 allowed into this account, then you would earn an impressive £315 in interest a year as it won’t be taxed.

Prior to July 1, you could only invest £5,940 into the account, but Virgin Money has said it will allow additional ISA top-ups within 30 days of opening. That means savers who opened the account on June 30, will have until July 30 to top up to the new £15,000 limit.

(Want to top up your existing fixed rate ISA with the new boosted allowance? Deadlines by which you’ll need to act vary among providers. Check who’s doing what with our table.)

Any catches?

Although you can make withdrawals from the Virgin E-ISA, you will lose 90 days’ interest as a result, so make sure you can afford to leave your cash untouched for the two-year term. If you don’t think you can, your best bet is to go for an easy access ISA instead. But there's good news there too...

Virgin has also just hiked the rate on its Easy Access Cash ISA to 1.50%. There’s no introductory bonus, transfers in are accepted and the account can be opened with just £1, while Nationwide’s Instant ISA Saver also pays 1.50% (variable) for the same deposit.

Only the Hanley Economic BS has a deal which is open to all that pays a higher rate of 1.55% but you’ll need £3,000 to qualify.

The Virgin Fixed Rate E-ISA is a limited issue so get your skates on if you want to apply.

Finally, this is an E-ISA which can only be managed online. If you have a strong preference to manage your finances by post, branch or telephone, this isn’t the deal for you.

Who’s it good for?

First off, as with any cash ISA, you will need to be aged 16 or over.

If you are, the two-year Virgin fixed rate E-ISA is ideal if you have a longer-term savings goal such as a wedding or house deposit.

But it’s also a smart option for anyone looking to supplement their income, as you can opt to have your interest paid monthly. 

What’s the verdict?

If you’re able to tie up your savings for a couple of years, then the Virgin account is a definite winner. While, as you can see from the table below, Cheshire Building Society’s Fixed Rate Cash ISA pays only a whisker less at 2.05%, you’ll have to operate the account in a branch.

If you only want to tie up your cash for a year, Virgin also offers one-year Fixed Rate E-ISA which pays 1.76% tax-free.

And if you are interested in three and five-year terms, Virgin is also top of the tables paying 2.25% and 3% respectively.

Top tip!

Be careful about locking into a longer-term fixed rate deal. Even though rates might look competitive now, there is a risk that they might not look quite so appealing a few years down the line once interest rates start rising.

Take look at our table to compare how Virgin’s new fixed rate ISA deals stack up against the rest...

Provider  Account
(Terms & conditions apply) 
Minimum Deposit  AER Term  Transfer In 
 Virgin Money  Fixed Rate Cash E-ISA Issue 83  £1  1.76%  1 Year  Yes
 Aldermore  Fixed Rate Cash ISA  £1,000  1.65%  1 Year  Yes
 Virgin Money  Fixed Rate Cash E-ISA Issue 83  £1  2.10%  2 Years  Yes
 Principality BS  2-Year Fixed Rate Cash ISA Issue 123  £1  1.85%  2 Years  Yes
 Cheshire BS  Fixed Rate Cash ISA (branch only)  £100  2.05%  2 Years  Yes
 Virgin Money  Fixed Rate Cash E-ISA Issue 83  £1  2.25%  3 Years  Yes
 Aldermore  Fixed Rate Cash ISA  £1,000  2.25%  3 Years  Yes
 Virgin Money  Fixed Rate Cash E-ISA Issue 83  £1  3.00%  5 Years  Yes
 Leeds BS  5-Year Fixed Rate ISA Issue 38  £100  2.85%  5 Years  No

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.

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