ISAs gain popularity as fixed-rate balances boom – top five one-year accounts today

Cash ISAs are gaining significant popularity as savers take advantage of rising fixed-rate product pricing and tax benefits, new data shows.

According to research by Paragon Bank, the amount of cash held in adult ISA accounts rose by nearly a fifth last year.

CACI data shows overall adult ISA balances grew by 17 percent, reaching £309.3billion by the end of 2023 and outpacing the growth of non-ISA balances.

The popularity of fixed-rate ISAs primarily fueled the surge in adult cash ISA balances.

In a notable shift, the amount of cash held in fixed-rate variants surpassed that of instant access ISA accounts for the first time in available CACI data (since January 2018), particularly evident in the final three months of the year.

Overall, fixed-rate ISA balances increased by a staggering 76 percent by the end of the year.

Derek Sprawling, savings director at Paragon Bank, said: “Last year marked the return of the ISA season, with much of that money heading into fixed-rate accounts as savers took advantage of increasing interest rates.

“As savings rates increased across the market, more people became exposed to tax as their returns breached their Personal Savings Allowance.”

He added: “One-year fixed-rate products were by far the most popular option for savers and the good news is that their product is likely to be maturing into a higher rate environment, meaning they should be able to achieve better returns if they move to a new ISA product.”

Top one-year fixed Cash ISAs

Cash ISAs enable people’s money to grow without having to pay tax on the interest above the Personal Savings Allowance (PSA), which is currently £20,000.

In the fixed rate sector, Virgin Money’s Fixed Rate Cash ISA Exclusive (Issue 10) takes the top spot for one-year fixes with an Annual Equivalent Rate (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.

OakNorth Bank places just behind with its Fixed Rate Cash ISA offering an AER of 5.06 percent. Savers can open an account with just £1 and interest is paid monthly. Early withdrawals are subject to 90 days’ loss of interest.

Aldermore follows with an AER of 5.05 percent on its One Year Fixed Rate Cash ISA. The account requires a minimum deposit of £1,000 to open and interest is paid on maturity. Similar to OakNorth, early withdrawals are subject to 90 days’ loss of interest.

Castle Trust Bank is also offering an AER of 5.05 percent on its one-year fix and recently earned a Moneyfactscompare.co.uk “excellent” rating. Savers need a minimum deposit of £1,000 to invest and interest is paid on maturity.

Earlier access to funds in this account will also be subject to 90 days’ loss of interest.

Finally, Kent Reliance places fifth on the list of high interest accounts with its Cash ISA One Year Fixed Rate (Issue 92) offering an AER of 5.03 percent.

The account can be opened with a minimum deposit of £1,000 and interest is paid on maturity. Early withdrawals will be subject to 90 days’ loss of interest.