Best Fixed Rate Cash ISAs for 2018

In my previous article we looked at the best fixed rate IFISAs for 2018. Yet, we discovered that, despite not being covered by the FSCS, those with the highest rates return were almost fully subscribed.

Never fear! If you’re looking for a safer place for your money with FSCS protection, then there’s plenty of options in the cash ISA market which also offer solid rates of return. Here are our top picks for solid long term returns:

As you might expect, it’s the ‘challenger’ banks that are coming through with the best rates, in general. However, some of the high-street banks are starting to offer competitive rates as a base interest rate rises in line with inflation.

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Shawbrook Bank – 5 Year Fixed Rate Cash ISA

  • Rate: 2.30%
  • Term: 5 Years

Shawbrook’s five year cash ISA with market-leading 2.30% guaranteed return. This might be significantly less than Innovative Finance ISAs but is at least protected by the FSCS up to £85,000.

Although the highest rate available for a Cash ISA, you’ll need a cool £5,000 to open an account at Shawbrook. Any withdrawals during the fixed rate period are subject to the loss of 360 days interest as an early exit charge.

Website: https://www.shawbrook.co.uk

United Trust Bank

  • Rate: 2.30%
  • Term: 5 Years

United Trust’s Four Year ISA Bond promises an almost-market leading 2.20%. That’s nearly the best out there by our reckoning. Interest is paid annually and withdrawals are subject to a penalty.

Bear in mind, United Trust are a little old fashioned – applications can only be made by snail mail.

Website: https://www.utbank.co.uk

Virgin Money

Virgin Fixed Rate ISA

  • 2.05% AER
  • Fixed-Rate Cash ISA
  • Covered by FSCS
  • Virgin Group discounts
  • Tax-Free ISA Wrapper
  • Allows ISA Transfers

Virgin has always liked to do things differently and with their E-ISA, you get ‘lounge access’, similar to the airport, when you visit a branch to manage your account. It’s not all a gimmick though.

As well as free refreshments and Wi-Fi, you’re guaranteed 2.05% and can invest from as little as £1.

Website: https://uk.virginmoney.com/savings

Skipton

If you want to transfer ISA savings from previous tax years, then Skipton might be up your street with 2.00% tax free.

You can find out how to do that here. Interest is calculated daily and added to your account annually.

Principality

Metro Bank

As expected, not all the high-street banks are able to equal the high AER’s offered by the smaller institutions, yet one that be worth looking at was Metro with a respectable 1.75% guaranteed for a five year investment.

Here too, you can start from as little as £1, or transfer cash from previous ISAs. Penalties for early withdrawals are a little less severe at 180 days interest.

Paragon

At Paragon, a challenger bank, you can start with a minimum of £500 with 1.95% guaranteed. Again however, you stand to lose 365 days interest should you need to make a withdrawal.

Interestingly, Paragon lets you transfer as much as £100,000 from previous ISAs. Apply online at Paragon.

Leeds Building Society

If you have less to invest then Leeds Building Society’s five year fixed rate ISA will let you start with as little as £100, yet you’ll still benefit from a healthy 2.00% tax-free AER.

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Interest is calculated annually and can be transferred to an account at another financial institution, which might be useful for some. However, penalties for early withdrawals are hefty – you’ll lose a full year’s interest.

How to Get a Better Return

It’s possible to get a a better return by utilising some ISA funds into a higher risk option – an Innovative Finance ISA.

These new type of tax-free accounts can offer attractive fixed-rates which beat inflation, but there is a higher risk of defaults. There is no FSCS protection either.

However, savers in the UK can utilise the benefits of Stocks and Shares ISAs, Cash ISAS and innovative finance ISAs in the same tax year. It’s possible to transfer partial ISA funds to diversify your investment and to get the best overall balance between risk and return.

Here are some of the top fixed-rate ISAs which are currently available.

1. London Capital and Finance 3 Year ISA 8%

London Capital and Finance Plc Innovative Finance ISA

  • 8.00% AER
  • 3 Year Term
  • Interest paid Quarterly
  • Fixed Rate Innovative Finance ISA
  • Tax-free
  • Allows ISA transfers

A newly launched product, which has a high rate of tax-free interest in the innovative finance ISA wrapper. All IFISA accounts are not subject to the same FSCS protection like Cash ISAs, so due diligence is needed.

LC&F’s latest figures state they have 9,500 investments with a loan book in excess of £122m. Over £300m worth of assets are held as security – with no borrowers having defaulted on their loans at present as well as all interest being paid on time to investors.

Such a product could be useful as a fixed-income part of a diversified portfolio for sophisticated investors.

Website: London Capital and Finance.

2. Zopa Core Innovative Finance ISA 4.00%

Zopa IFISA

 

  • 4.00% Annualised
  • Peer to Peer Loan Investments
  • Fixed-Rate Innovative Finance ISA
  • Not FSCS – Capital is at risk
  • 18 and over only
  • Min investment £1,000

It is now possible to invest into a ZOPA innovative finance fixed-rate ISA. Two options are available, which have different risk profiles – Zopa CORE is 4.00% and Zopa Plus has a fixed-rate of 4.60%.

They allow transfers into this ISA, and as it is an IFISA, you’ll be able to open an account as well as a Stocks and Shares and Cash ISA. Bear in mind that you will not be able to pay into two different IFISAs in the same tax year.

Website: Zopa

3. Landbay Innovative Finance ISA 3.54%

Landbay Fixed Rate ISA

  • 3.54% Annualised
  • Peer to Peer Investments
  • Property backed ISA
  • Fixed Rate Innovative Finance ISA
  • Not FSCS
  • Rate is only ‘Expected Return’
  • 18 and over only
  • £5,000 minimum investment

The time period of this new ISA from the Landbay P2P platform could vary in rate and term length. There are no fees and investments can be sold via a secondary market if there is a buyer.

Website: Landbay.

Don’t forget to check our comprehensive comparison of fixed-rate savings accounts, checked and updated multiple times a day. 

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Last updated: July 18th, 2018

Kieran Ball

Award-winning copywriter, author, blogger and financial journalist, Kieran’s work has appeared in every conceivable medium. Technology and finance are just two of his passions. He has published a travel novel, worked as a music journalist and written advertising campaigns for some of the biggest companies in the world.

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