Although ISA rates have remained subdued this year, our research has found that over the last month rates have started to rise, which will come as good news for ISA savers looking to transfer their ISA. Here we look at what has been happening to ISA rates and the top rates currently available to those looking to transfer an ISA.
Average five, two and one year fixed ISA rates have risen since the start of September, as well as average easy access ISA rates. The average five year fixed ISA rate has increased by 0.09% since the start of the month, rising from 1.09% on 1 September to 1.18% today. During this same period the average two and one year fixed ISA rate have risen by 0.04% and 0.06% respectively, with the average two year rate increasing from 0.64% on the 1 September to 0.68% today, and the average one year rate from 0.58% to 0.64%. The average easy access ISA rate has also increased this month, rising from 0.32% on 1 September to 0.35% today.
Despite there only being a small increase in average rates, as the below chart shows, this is the first month since March this year when average ISA rates have started to rise and could indicate the start of a slow recovery in ISA rates.
|Average ISA rates|
|March 2020||April 2020||May 2020||June 2020||July 2020||August 2020||September 2020||Today|
|Easy access ISAs||0.83%||0.80%||0.63%||0.45%||0.38%||0.32%||0.32%||0.35%|
|One year fixed ISA||1.14%||1.04%||0.91%||0.75%||0.61%||0.56%||0.58%||0.64%|
|Two year fixed ISA||1.18%||1.06%||0.94%||0.77%||0.65%||0.63%||0.64%||0.68%|
|Five year fixed ISA||1.47%||1.28%||1.27%||1.18%||1.04%||0.99%||1.09%||1.18%|
Saying this, with base rate remaining at 0.1% and the possibility of it falling into a negative rate by the end of this year or early 2021, it is uncertain if ISA rates will continue to rise. As such, for those looking to transfer an ISA, waiting to see if rates rise further may be risky and instead they may be better off securing the top ISA rates available now.
Those looking to transfer into a five year fixed rate ISA will find that UBL UK pays the highest gross rate on an ISA that accepts transfers in. UBL UK’s 5 Year Fixed Rate Cash ISA pays 1.44% gross on maturity on its 5 Year Fixed Rate Cash ISA which accepts transfers in from cash ISAs only. A minimum deposit of £2,000 is needed to open this ISA. There is also a version of this ISA that pays interest on anniversary at a gross rate of 1.40%, as well as versions that pay interest quarterly or monthly at a gross rate of 1.39%.
Hodge Bank pays 1.40% gross yearly on its 5 Year Fixed Rate Cash ISA, which accepts transfers in from cash and stocks and shares ISAs from a minimum of £1,000. A minimum deposit of £1,000 is needed to open this ISA. There is a version of this ISA that pays interest monthly at a gross rate of 1.39%.
ISA savers looking to transfer into a two year fixed rate ISA will find Gatehouse Bank offers the top rate paying an expected profit rate of 1.08% gross on anniversary. This ISA accepts transfers in from cash and stocks and shares ISAs. A minimum deposit of £1,000 is needed to open this ISA.
The next best rate in the two year fixed ISA chart comes from Hodge Bank, which pays 1.05% gross yearly on its 2 Year Fixed Rate Cash ISA. This ISA accepts transfers in from cash and stocks and shares ISAs, but transfers in must be for a minimum of £1,000. It requires a £1,000 minimum deposit to open. There is also a version of this ISA that pays interest monthly at a gross rate of 1.04%.
The top rate in the one year fixed ISA chart comes from Gatehouse Bank, which accepts transfers in from cash and stocks and shares ISAs. Gatehouse Bank pays an expected profit rate of 1.03% gross on anniversary on its 1 Year Fixed Term Cash ISA. To open this ISA a minimum deposit of £1,000 is needed.
Both Charter Savings Bank and Cynergy Bank currently pay the second best one year fixed ISA rate. Charter Savings Bank pays 0.93% gross on anniversary or monthly on its 1 Year Fixed Rate Cash ISA, which accepts transfers in from cash and stocks and shares ISAs. Charter Savings Bank also allows savers to split their ISA allowance between different ISAs within its ISA product range. A minimum deposit of £5,000 is needed to open this ISA. There is also a version of this ISA that pays interest monthly at a gross rate of 0.93%. Cynergy Bank pays 0.93% gross on anniversary on its Loyalty Fixed Rate Cash ISA, which is only available to existing customers of six months or more. ISA transfers in are accepted from cash ISAs. A £500 minimum deposit is needed to open this ISA. A Cynergy Bank Authenticator App or Digipass is required to open and operate the account.
For those looking for the flexibility of an easy access ISA, the top rate in this chart is currently being offered by Cynergy Bank, which pays 1.00% gross yearly on its Online ISA (Issue 5), but this ISA only accepts transfers in from cash ISAs on account opening. A minimum deposit of just £1 is needed to open this ISA. A Cynergy Bank Authenticator App or Digipass is required to open and manage the ISA.
Coventry Building Society pays the next best rate of 0.96% gross on anniversary on its Triple Access ISA (Online). This ISA accepts transfers in from cash ISAs, stocks and shares ISAs, Lifetime ISAs, stocks and shares Lifetime ISAs, and Help to Buy ISAs. A minimum deposit of £1 is needed to open this ISA.
As well as average rates falling this year on ISA available to open, average rates on closed easy access and notice ISAs have also been falling. For example, our research has found that the average rate on a closed no notice ISA (which includes easy access ISAs) was 0.45%* AER on the 1 September and the average closed notice ISA rate was 0.75%* AER on the 1 September. This is a fall of 0.33% since March on closed no notice ISAs, when the average rate stood at 0.78%. The average closed notice ISA rate has fallen by 0.34% since March, when the average rate stood at 1.09%.
The fall in average closed ISA rates could mean that those with an existing ISA will have seen their rate decrease since March. This means that savers with an existing ISA should check to see what their current ISA rate is and compare it to the top rates in the charts to see if there is a higher rate available.
When looking to move ISA funds from one ISA to another it is important to ensure that the money is transferred or else the tax-free status on the money will be removed. If the tax-free status is removed it means that no more than £20,000 will be permitted into an ISA for the 2020/21 tax year. Transferring the money in the ISA instead will ensure that over £20,000 can be moved into the new ISA as well as keeping the additional £20,000 tax-free limit for the 2020/21 tax year. When transferring an ISA it is important to follow the correct procedure to ensure the tax-free status of funds is maintained. Normally, the procedure will involve filling out an ISA transfer form, after which the new ISA provider and the existing provider should arrange the transfer. For more information about transferring ISAs read our guide Things worth knowing about ISA transfers.
*AER at £20,000 deposit
If you have inherited an ISA, the rules on transferring the ISA are slightly different and is known as an Additional Permitted Subscription Allowance (APS). Funds transferred as an ASP still retain their tax-free status and are a one-off ISA allowance that is granted to the spouse or civil partner of the deceased. It should be noted that only certain providers accept APS a full list of which can be found on our guide The rules on inheriting ISAs.
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