Bank bumps rate on its one-year fixed ISA to ‘competitive’ 3.9%

Savings accounts: Claer Barrett outlines where to get good rates

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While banks have been reflecting the Bank of England Base Rate hikes across a number of their services, saving accounts have been offering some of the highest returns seen in decades. Shawbook Bank is the latest to have boosted interest rates on its one-year fixed ISA, offering a “competitive choice” for savers.

Fixed-rate ISAs are a type of savings account offering a fixed rate of interest for a set length of time.

This means the bank or building society cannot change the interest rate during the term of the bond, which works well for account holders hoping to save long-term.

ISAs are often a favourable route people take to save, as these accounts allow up to £20,000 to be deposited per year, without having to pay tax on the interest above the Personal Savings Allowance (PSA).

Shawbrook Bank’s 1 Year Fixed Rate Cash ISA Bond (Issue 64) is currently topping the leaderboard with the best rate, after upping interest by 0.2 percent, now offering an Annual Equivalent Rate (AER) of 3.9 percent.

Commenting on the deal, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Shawbrook Bank has increased the rate on its one-year fixed ISA by 0.20 percent, improving its position in the market.

“Savers searching for a guaranteed return on their cash and wishing to utilise their ISA allowance may find this a competitive choice as the deal holds a more prominent position in its sector.

“Consumers can make Cash and Stocks and Shares ISA transfers into the account, and if they so wish, access their deposit subject to a loss of interest penalty.

“Overall, the deal earns an Excellent Moneyfacts product rating.”

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The account can be opened with a minimum deposit of £1,000 and savers can accumulate two different AERs depending on the option they choose.

Those who choose interest to be applied annually will receive a 3.9 percent gross rate on the anniversary of the account opening, while those who opt for monthly interest will receive a 3.83 percent gross rate.

As the account has a fixed term, savers can only withdraw money without incurring any charges at the end of the fixed term, also known as “maturity”.

However, savers are permitted to make withdrawals, including transferring out to other Cash ISA providers, before maturity, but this is subject to a loss of 90 days’ interest. This is known as the early exit charge.

In some cases, the bank warns withdrawing early could mean people get back less than the amount originally invested.

At maturity, people can either withdraw their funds, transfer them into a new Shawbrook account, or transfer part or all of the balance to an alternative ISA provider, subject to terms and conditions.

While Shawbrook Bank’s one-year fixed ISA currently takes the lead, competing banks are fast on its heels.

According to MoneyFacts, Kent Reliance’s Cash ISA 1 Year Fixed Rate (Issue 59) isn’t far behind, offering an AER of 3.85 percent.

This account requires a minimum £1,000 deposit to open the account and like Shawbrook, early withdrawals will also be subject to a 90 days’ loss of interest.

However, Virgin Money’s 1 Year Fixed Rate Cash E-ISA (Issue 532) is also offering a competitive AER of 3.85 percent with what could be seen as less strict conditions.

The account can be opened with a minimum of £1 and while early withdrawals will also be subject to interest loss, savers could face a slightly fewer 60 days’ loss with this account.

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