Compare Fixed-Rate Cash ISAs

Fixed rate cash ISAs

If you want to take advantage of your 2020/21 cash ISA allowance and have money you can afford to lock away for a few years, a fixed rate cash ISA could be ideal. It pays a guaranteed amount of interest for a set length of time

You can invest up £20,000 in a cash ISA. Some accounts also allow you to transfer in money invested in the previous tax year so you can maximise returns on all your tax-free savings.

You can open the accounts below through MoneySuperMarket. We can show you all the accounts on the market, but we can only help you to open some of them.

Individual Savings Accounts – better known as ISAs – are a set of financial products which allow you to save a significant amount of money every year without having to pay tax on the interest.

There are five main types of ISA, but cash ISAs are the simplest and most common. At present, you can invest up £20,000 into a cash ISA every tax year, allowing you to build up a significant tax-free savings pot over time.

What are fixed-rate cash ISAs?

Fixed-term cash ISAs are accounts which you open for a set period of time – normally between one and five years – with a pre-agreed rate of interest. When you open the account, you have 14 days to put as much money into it as you like, and once the window closes the money will continue to earn tax-free interest until the account matures.

The government currently imposes a £20,000 maximum on how much you can invest into ISAs every tax year – which runs from April to April. This upper limit can change, though it hasn’t for the last few years. You can invest in several ISAs, but never more than £20,000 across them all in a single year.

Fixed-term accounts are different from easy-access accounts because they lock your money away for the agreed term. They offer better rates of interest, but the trade-off is that you can’t easily access your money – and if you do, you’ll forfeit a portion of the interest you've earned.

What are the benefits of fixed-rate cash ISAs?

When it comes to building up a nest egg, putting your money into an ISA is a complete no-brainer if you are a taxpayer, as the returns are tax-free.

This tax break is in addition to the Personal Savings Allowance (PSA), which allows basic-rate taxpayers to earn £1,000 in savings interest each year without having to pay any tax on it.

  • Basic-rate taxpayer have an income of £50,000 or under
  • Higher-rate taxpayers earn between £50,001 and £150,000, and have a PSA of £500 a year
  • Additional-rate taxpayers, who earn £150,001 and above, do not get a PSA

With rock bottom interest rates, and no sign of any change on the horizon, it’s well worth considering a fixed-rate ISA over an easy-access cash ISA – if you can afford to lock your money away, as the interest rates tend to be higher.

With a fixed-rate cash ISA you earn a guaranteed rate of interest for a set period of time. The rates paid are higher than on other accounts because you are tying your money up – and because the provider knows how long they will have your money for.

What cash savings accounts do savers own?

Surveyed 2,000 internet users, data collected by Mintel, accurate as of May 2019

What types of fixed-rate cash ISA are available?

Fixed-rate cash ISAs tend to run between one and five years. The longer you fix for, the higher the returns on offer. But you do need to ensure you can afford to lock your money away for the full term as you can’t usually access your money during the fixed term without incurring a hefty penalty. Some accounts will only allow you to get at your money in exceptional circumstances.

In addition, you need to be wary of fixing for too long, as while rates have been at very low for several years now, they will climb upwards at some point. If your money is tied up for several years, you could risk finding yourself stuck with an uncompetitive interest rate.

By contrast, if you opt for a shorter-term fixed-rate ISA, you can reassess the market regularly to check you’re getting the most competitive rate.

Should you get a fixed-rate cash ISA?

Before you pick this type of account, you need to be happy with the idea of locking away your lump sum, as opposed to drip-feeding cash into the account little by little each month.

If you don’t have a lump sum or you want an account that allows you to pay money in as and when you can, an easy-access cash ISA is a better option.

Remember that any funds withdrawn from an ISA account cannot be replaced – unless you haven’t used your full ISA allowance.

Compare fixed-rate cash ISAs with MoneySuperMarket

Given that there is such a wide choice of savings accounts – and then different types of ISA account within this, it’s vital to do your research.

Moneysupermarket can help you choose a fixed-rate ISA from by comparing products from a range of providers.

In just a few seconds, you can see all the different types of ISAs and rates available, as well as the terms and conditions for each account – making it easy to compare deals to find the right one for you.