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With a fixed rate cash ISA, your funds are locked away for a set period of time and, in return, you’ll receive a fixed rate of interest. This means the interest rate is guaranteed to remain the same throughout the term, regardless of any changes in market conditions.
Fixed rate and easy access cash ISAs both come with their own sets of advantages and disadvantages; the right account for you will depend on your needs, circumstances and savings goals:
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Fixed rate cash ISAs |
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Easy access cash ISAs |
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*Recent economic volatility has resulted in the gap between fixed and variable rates narrowing. Some fixed accounts are currently offering lower rates than their easy access and notice counterparts due to uncertainty surrounding the future of the savings market.
Locking in a competitive rate with a fixed rate cash ISA may be a good idea if you think interest rates are going to drop. Equally, you may want to consider a fixed rate cash ISA if you’re saving towards a long-term goal and won’t need access to your cash beforehand.
Before settling on a fixed term, you’ll want to assess current market conditions as well as your own savings goals.
If you think interest rates will rise in the near future, you may choose a shorter fixed rate cash ISA of one year or less. Alternatively, if you think interest rates are likely to drop, you may want to lock in a competitive rate for as long as possible.
Learn more about 4 year fixed rate ISAs and 5 year fixed rate ISAs.
If you know you’ll need to make regular withdrawals from your savings, a fixed rate cash ISA may not be the best account for you. Instead, you may want to consider an easy access cash ISA or a notice cash ISA.
While most fixed rate cash ISAs prohibit making withdrawals, some will allow you to gain early access subject to a loss of interest penalty and/or account closure.
Alternatively, all ISAs must allow you to transfer your ISA funds to another provider, although this will also usually incur a penalty in the case of fixed rate ISAs.
You can find out if an account permits early access, and any penalties involved, by viewing ‘further details’ on our charts.
If the holder dies before the fixed ISA matures then it will no longer qualify as an ISA from the date of death. Any beneficiaries from the account-holder’s estate will not be able to access the funds until either their executor closes it or the administration of their estate is completed.
While there will be no Income Tax or Capital Gains Tax payable up to that date the ISA will form part of your estate for the purposes of Inheritance Tax.
If you are survived by a spouse or civil partner then they can inherit your fixed rate ISA and retain the tax benefits, but this must be done within three years of the holder’s death.