ISAs should always be thought of as the go-to place to stash your savings. You get interest paid entirely tax-free, unlike with a traditional savings account where you need to give a chunk of everything you earn to the taxman, and with the ISA limit having been raised to £15,000 there's now even more reason to use these nifty little accounts.
Fixed rate versions tend to offer better rates than their easy access counterparts, but what if you don't want to lock your money away for too long? Well, you don't have to – two-year ISAs offer rates that will easily beat inflation to give you a measurable return from your money, and it's these we're going to focus on today.
These accounts can be ideal for those who don't mind locking their money away for a while for the trade-off of a better rate, and the relatively short two-year term is a definite plus with the prospect of an increase to base rate on the cards.
It's important to remember that fixed rate accounts will often come with penalties if you want to withdraw the cash before the term ends, and few will let you make further additions, so you really do need to be confident that you can keep your money tied up (an easy access savings account should be used for that emergency fund instead of a bond).
But, if you're happy to lock your money away for a mere 24 months for the promise of better returns, these accounts could be more than worth it. So, here are the top six two-year fixed ISAs currently on the market.
Barclays 2 Year Flexible Cash ISA Issue 4
Taking the top spot is this deal from Barclays, paying a market-leading 2.02% on a minimum investment of just £1.
Savers can benefit from the flexibility of further additions being allowed, and the option of being able to make up to three penalty-free withdrawals during the term adds to the appeal. Interest is paid monthly and must be paid away, making it a competitive choice for those that wish to supplement their income.
AA 2 Year Fixed Rate ISA
In second place is this account from AA, paying a highly competitive 2.00% yearly from an initial investment of just £1.
Further additions aren't permitted but transfers in are, and the option to access funds early should the need arise (subject to a penalty) adds to the flexibility.
Aldermore 2 Year Fixed Rate Cash ISA
Just making the top three is this deal from Aldermore, an account that also pays 2.00% yearly but this time on a minimum investment of £1,000.
Further additions are not permitted so savers will need to be happy with the initial investment from the outset. However, the account does offer the flexibility of early access, subject to an interest penalty.
Marsden BS Fixed Rate Cash ISA
Next up is this account from Marsden BS, paying 2.00% yearly on a minimum investment of £9,000.
No flexibility for further additions and withdrawals will be allowed, however early closure is, but this is subject to a hefty 270 day interest rate penalty.
Bank of Cyprus UK Fixed Rate Cash ISA
This account from Bank of Cyprus UK easily makes the top five, paying a competitive rate of 1.90% on a minimum investment of £500.
Savers can benefit from the flexibility of being able to make further additions, but as withdrawals aren't permitted – unless the account is closed and interest lost – they'll need to be comfortable with the term chosen.
Principality BS 2 Year Fixed Rate Cash ISA Issue 27 (Standard)
Just making the top six is this account from Principality, offering 1.85% yearly on a minimum investment of £500.
Further additions are allowed while the issue remains open, but savers need to be confident they can keep those funds tied up, as earlier access will result in closure of the account and a loss of interest penalty.
Information & Rates correct as at: 02.09.2014
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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