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Top 6 inflation-beating cash ISAs

Top 6 inflation-beating cash ISAs

Category: ISAs

Updated: 14/12/2016
First Published: 14/12/2016

Inflation saw a larger than expected jump in November, official figures have revealed, with the measure of CPI standing at 1.2% (up from 0.9% in October). Unfortunately, this has had a damaging impact on the savings market: less than a third of all savings accounts now pay a rate that will match or beat it, none of those being easy access accounts.

Inflation has been on a general upwards trajectory over the last few months, and it's expected to rise even faster over the next year. This, combined with record low savings rates, means it's becoming more difficult to find an account that will give a measurable return, so don't leave it to chance!

It's vital to make sure you're getting the best deal possible. ISAs continue to offer one of the best ways to secure those inflation-beating returns, despite the Personal Savings Allowance (PSA) being in force (which allows up to £1,000 in interest to be earned tax-free each year regardless of where your savings are held).

Even so, it's still worth investing in an ISA: your pot will remain tax-efficient no matter what happens to savings rates or PSA rules in future, and if you build up a healthy pot and earn more than £1,000 in interest, it becomes even more beneficial.

So, with that in mind, we've compiled a list of the top six inflation-beating fixed rate cash ISAs currently available. We've focused on longer-term accounts of at least three years as these are the ones that will offer the best returns on your money - you'll have to lock your cash away, but the returns could be worth it!

Top 6 inflation-beating cash ISAs:


AER
Details

Paragon Bank
5 Year Fixed Rate Cash ISA
1.60% AER
  • Rate fixed for five years
  • £500 minimum investment
  • Transfers in of previous ISAs permitted
  • Further additions allowed for 15 days from account opening
  • Earlier access and transfers out subject to 365 days' loss of interest
  • Internet operated
  • Interest paid on anniversary

Taking the top spot is this five-year deal from Paragon Bank, paying a market-leading 1.60% from a minimum investment of £500. Transfers in are allowed, as are further additions for a limited period. Withdrawals are also possible, although it should be noted that this earlier access will result in the loss of 365 days' interest, the same penalty as applies to transfers away from this internet-operated account.


AER
Details

Virgin Money
Virgin Fixed Rate Cash E-ISA Issue 206
1.51% AER
  • Rate fixed to 24.12.21
  • Minimum investment of £1
  • Transfers in permitted
  • Further additions for 30 days after account opening
  • Earlier access and transfers out on 180 days' loss of interest
  • Internet operated
  • Interest paid yearly

In second place is this internet-operated deal from Virgin Money, a five-year bond that pays 1.51% AER from a minimum investment of just £1. It permits both transfers in and further additions, together with earlier access, although this is subject to a 180-day interest penalty. However, it thankfully doesn't ask you to close the account should you need to access your cash early.


AER
Details

Metro Bank
5 Year Fixed Rate Cash ISA Issue 4
1.50% AER
  • Rate fixed for five years
  • Minimum investment of £1
  • Transfers in of previous years' ISA savings permitted within 30 days of account opening
  • No further additions or withdrawals
  • Earlier access on closure and 180 days' loss of interest
  • Transfers out on 180-day loss
  • Account must be opened in branch by new customers, although existing members can also open an account online or by phone. Account then becomes branch and phone-operated
  • Interest paid yearly and must be compounded
  • Access via nominated account

Securing a top three spot is this five-year deal from Metro Bank, paying 1.50% yearly from a minimum investment of £1. Transfers in are accepted for a limited period, but further additions and withdrawals are not. However, earlier access to funds is possible, subject to closure of the account and 180 days' loss of interest.


AER
Details

Shawbrook Bank
5 Year Fixed Rate Cash ISA Bond Issue 5
1.45% AER
  • Rate fixed for five years
  • Minimum investment of £5,000
  • Transfers in of previous years' ISA savings permitted on account opening
  • Further additions permitted while issue remains open
  • Withdrawals and transfers out subject to 360 days' loss of interest
  • Internet-operated
  • Interest paid on anniversary

Next up is this deal from Shawbrook Bank, a five-year ISA that pays 1.45% yearly from a minimum investment of £5,000. Transfers in are accepted, as are further additions for a limited period. Withdrawals are also permitted subject to a loss of interest penalty, with the same penalty applying to those who wish to transfer away from this internet-operated account.


AER
Details


Hodge Bank
5 Year Fixed ISA

1.40% AER
  • Rate fixed for five years
  • Minimum investment of £5,000
  • Transfers in permitted (min. £5,000)
  • No further additions or withdrawals
  • Earlier access on closure and a penalty fee
  • Transfers out subject to a penalty
  • Account can be opened and operated in branch, by phone or by post
  • Interest paid yearly and must be compounded

Hodge Bank nabs a place in the top five with this deal that pays 1.40% yearly to those with a minimum of £5,000 to invest. Transfers in are accepted, subject to a minimum amount, but further additions and withdrawals are not. However, earlier access to funds is possible, albeit subject to closure of the account and a penalty fee.


AER
Details

Hodge Bank
4 Year Fixed ISA
1.30% AER
  • Rate fixed for four years
  • Minimum investment of £5,000
  • Transfers in permitted (min. £5,000)
  • No further additions or withdrawals
  • Earlier access on closure and a penalty fee
  • Transfers out subject to a penalty
  • Account can be opened and operated in branch, by phone or by post
  • Interest paid yearly and must be compounded

Hodge Bank has done it again with a second account securing a place in the charts, this time its four-year bond which just squeezes into the top six. It pays a rate of 1.30% yearly and only asks you to lock away your cash for four years – the shortest term in this overview – with all other features mirroring that of its five-year counterpart.

Information & rates correct as at: 13.12.2016

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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