The Post Office has increased the interest rates payable on its fixed rate cash Isas, which will offer returns of between 2.9% and 3.6% AER from 14 February.
From the start of next week, the Post Office will pay better rates on its one-, two- and three-year fixed rate cash Isas.
The fixed rate cash Isas from the Post Office are already Which? Best Rate accounts, but the increase in the rates will push the Post Office accounts further up the Best Rate table.
How do the Post Office fixed-rate savings accounts compare?
The one-year fixed rate cash Isa benefits from the biggest increase, with rates moving from 2.65% to 2.9%, bringing it closer to the current market leader, Northern Rock, which pays 3.05%.
The two-year account will pay 3.2%, up by 0.1% from the previous rate, and the three-year account will increase its rates from 3.4% to 3.6%. Aldermore tops the Which? Best Rate tables in both these categories, paying 3.3% on its two-year fixed rate cash Isa and 4.1% on it’s three-year deal.
The savings account small print
The Post Office accounts accept transfers from other cash Isa providers, with no limit as to how much you can transfer, but a minimum of £500.
If you’re paying new money in, there is a minimum deposit limit of £500 and a maximum of £5,100. Remember: you have an annual cash Isa limit of £5,100 and you can’t pay into more than one cash Isa each tax year.
As with many fixed rate savings accounts, you can’t add to your fixed rate cash Isa during the fixed term. So if you pay in just £500, for example, you can’t add anymore for the year and you can’t open a second cash Isa with another provider to make use of the rest of your £5,100 allowance.
Should you save in a fixed-rate cash Isa?
Melanie Green, Principal Money Researcher at Which? said: ‘It’s good news for savers that the Post Office has decided to increase the interest rates its paying on its fixed rate cash Isas. Before signing up for a fixed-rate account, however, make sure you’re happy for your money to be locked away.
‘Withdrawals aren’t allowed during the fixed rate term – and if you need to close the account during that period, you’ll find there’s a penalty to pay.’
To compare all kinds of cash Isas – including fixed-rate and instant access deals – visit the Which? Best Rate cash Isas review.
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