Shawbrook Bank is offering a “competitive” one-year fixed ISA paying 4.98 percent interest, earning an “excellent” Moneyfactscompare rating.
Savers need a minimum deposit of £1,000 to open an account with the challenger bank, and interest can be paid monthly or annually, which “may also be appealing”, a savings expert has said.
Commenting on the deal, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “Shawbrook Bank has reduced the rate on its one-year fixed rate Cash ISA this week.
“Despite the reduction, savers can still receive a competitive 4.98 percent gross/AER and it may appeal to those searching for a guaranteed return on their cash and wishing to utilise their ISA allowance.
“There is also an option to receive monthly interest paying 4.87 percent gross/4.98 percent AER, which may also be appealing.
“Consumers can make Cash and Stocks and Shares ISA transfers into the account if they wish.”
However, Ms Eastell added: “It is important to note that early access to their deposit is permitted subject to a 90-day loss of interest penalty. Overall, the deal earns an Excellent Moneyfacts product rating.”
But while Shawbrook Bank is offering an attractive deal, it isn’t currently topping the table. Virgin Money with an AER of 5.25 percent.
There is no minimum investment amount to get started, interest is applied annually, and earlier access will be subject to 60 days’ loss of interest.
Punjab National Bank (International) Limited’s Fixed Rate Cash ISA falls just behind with an AER of five percent.
The account can be opened with a minimum deposit of £1,000 and interest is paid on maturity.
Premature withdrawal from the account is allowed for the full amount after giving notice of a minimum of 30 days – partial withdrawals are not allowed.
ISAs are becoming increasingly popular amongst Britons as an effective tax wrapper while personal savings allowances remain frozen.
With an ISA, people can save up to £20,000 a year tax-free, and fixed-rate options enable savers to lock in the interest offered at the start of the term.
Alice Haine, a personal finance analyst at wealth management platform Bestinvest, said: “Tax-free ISAs allow savers to grow their wealth and withdraw investments when they want without fear of a heavy tax bill at the end.”
She added: “Remember, this is a ‘use it or lose it’ allowance because you cannot carry it into the next tax year if it isn’t used.
“No one wants to pay tax on money they have already been taxed on, and savers looking to secure this year’s £20,000 allowance in full before it disappears must fund an account with that amount by April 5.”