Help & Tips
How is a fixed rate ISA different to a cash ISA?
Fixed rate ISAs ask you to lock your money away for a set period- usually between 1 and 5 years. The longer you lock it away, the higher the rate of interest- but you won’t be able to access your money during this time.
The rate of interest paid on your savings is fixed for a set period- usually between 1 and 4 years. You also might not be able to withdraw your money in that time, but that varies between providers. The alternative is a variable rate ISA and the amount of interest you’ll receive on your savings varies. The amount you can pay into a fixed rate ISA and a variable ISA is the same- currently £5,340.
You may want to think about fixed rate ISAs if you have savings you won’t need for a while, and if you have previous years’ ISA balances to transfer. The risk with fixed rate ISAs is that if the Bank of England base rate soars, the amount of interest you receive won’t increase, whereas with a variable rate ISA, which tracks at a certain rate above the base rate, you’d be able to earn more interest.
Savings tools
Getting into the savings habit can often be the hardest part, as it can often mean you have to tighten your belt or stick to a stricter budget. To help you work out where you can make some changes to your spending we have developed a handy cost calculator so you can work out quickly and easily just where your money goes each month to help you decide where you could spend less to help you save more.
If you have got a savings goal in mind, or would like to know just how long it will take you to reach your target, we have a savings calculator that can help. You can see just how much you need to save each month and how much interest you will earn.
Deciding on exactly which savings account to use can be tricky, there are fixed accounts, ISAs, easy access accounts - basically lots to choose from! To try and help you determine just where to put you money we have come up with a handy savings tree that shows you some of the places you can put your cash. This isn't financial advice, but rather a starting point for you to start thinking about what savings accounts are right for you.
Glossary
AER
Annual Equivalent Rate: shown as a percentage, this tells you the rate of interest you will earn over the period of 1 year. If your interest is paid monthly then the AER may be higher than the gross rate.
Annual Interest
The interest of an account paid annually
Base Rate
The offical rate of interest as set out by the Bank of England
Basic Rate Tax
Basic rate tax is charged at 20% on the first £35,000 of income above your annual personal allowance. The personal allowance is £7,475 for the under 65s, £9,940 for those aged 65-74 and £10,090 for the over 75s
Cash ISA
This is a Tax Free savings account where you can save up to £5,340 in a tax year
Current Account
An account for day to day use
Fixed Rate
When the rate of interest is fixed for a period of time
Fixed Rate Bond
A fixed rate bond allows you to earn a higher rate of interst by locking you money away for a set period of time. These durations can range between 1-6 years in length
Fixed rate ISA
An ISA where the rate is fixed for the life of the account
Fixed term
The set length of time of an account
Gross
Total amount of interest before tax
Instant Access Accounts
This type of account allows you to access your money at any time, with no notice or penalties
Introductory Bonus
A fixed introductory bonus on a variable interest rate account, this is normally set for a certain length of time from the opening of the account. Once the introductory period is over the rate will return to the normal variable rate
Junior ISA
An ISA designed especially for children
Lump Sum
A one off amount of money an individual wants to make into an account
Net
Interest after tax
Notice Accounts
A savings account where the account holder is required to give a notice of withdrawal a specified number of days beforehand
Stocks & Shares ISA
An ISA where your money is invested in the Stocks & Shares market
Tax-free allowance
The amount allowed to be invested in an ISA account which is free of income tax
Variable Rate
The rate of interest is not fixed so can fluctuate throughout the term of the account