Nationwide has increased the rates on its 18-month fixed-rate cash Isa to entice savers to invest before the Isa window shuts on 5 April 2011.
The new rate of 3.55% AER on balances between £1 and £24,999 applies to all accounts opened from today. Savers with balances of £25,000 and above will receive a rate of 3.75% AER. The bonus rate on Nationwide’s MySave Online Plus account is also being increased, bringing the overall rate paid to 3.05% AER.
2-year fixed-rate cash Isas
Despite being an 18-month account, the new Nationwide Isa compares well with leading 2-year fixed-rate cash Isas, with leading accounts currently paying rates of 3.50% AER. Santander’s two-year Fixed-Rate cash Isa is the top-payer in this category, paying 3.70%, with an initial deposit of £1. Leading 3-year fixed-rate cash Isas are currently paying rates of around 4% AER.
Best rate savings accounts
If you’re after a better return, savings accounts that restrict access to your money for two years are currently paying higher rates than 2-year fixed-rate cash Isas. Cheshire Building Society’s two-year Fixed-Rate Issue 28 pays a market leading 3.95% AER but can only be accessed by branch or post. The top-paying internet account comes from Birmingham Midshires, which pays a slightly lower rate of 3.85% AER.
However, if you’re a taxpayer, you’ll need to deduct 20% (or 40% if you’re a higher-rate taxpayer) from your return. Interest on Cash Isas, by contrast, is tax-free.
Visit our savings account reviews to see the best two-year fixed-rate savings accounts currently available.
Isa limits increasing
The overall ISA subscription limit is currently £10,200 per tax year (the limit will increase to £10,680 for the next tax year). Up to £5,100 (£5,340 from next tax year) of this can be saved in a cash Isa, while the remainder can be invested in a stocks and shares Isa with either the same or another provider.
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