Best 5-year fixed-rate ISAs
Table: sorted by interest rate, promoted deals first
If you’re looking for a better rate on your tax-free savings, then opting for a longer-term like 5 years could unlock the top tier of savings rates. But you’ll need to be comfortable leaving the money to grow for the duration of that term – early withdrawals come with a penalty.
What is a 5-year fixed-rate cash ISA?
ISAs (Individual Savings Accounts) are govenment-defined with tight parameters for both savers and account issuers. A 5-year fixed-rate ISA is a type of “cash ISA” – which is one of four different types of ISA. You can pay up to a maximum of £20,000 into ISA accounts each year, and any interest you earn is tax-free.
The “5-year fixed-rate” part means that the bank pledges to keep your interest rate at an agreed level for the duration of the 5 years. If the Bank of England Base rate then goes down, and savings rates across the market inevitably follow it, yours will stay put. In that scenario, you’d be in an enviable position. But if the Bank of England base rate goes up, and savings rates across the board follow suit, your rate won’t.
Can I make withdrawals from a 5-year fixed ISA?
Banks providing ISAs are legally obliged to let you withdraw your money whenever you want. But in the case of a fixed-rate ISA, they charge a penalty for any withdrawals prior to the end of the set term – typically expressed as x days’ interest on the sum withdrawn. So if the penalty was 90 days’ interest (which is fairly normal) and you withdrew £5,000 before the end of the fixed term, you’d incur a penalty of around £45.
Banks make a profit by lending money out and charging a higher interest rate than they award to savers. They are better-able to put your money to work if they know you’re not going to suddenly need it back. Non-ISA 5-year fixed-rate bonds will often pay an even higher rate than their ISA counterparts, because the banks can simply refuse to release funds ahead of time (except in the event of the account holder’s death).
Can I top-up a 5-year fixed-rate ISA during the term?
Although some accounts may allow “further contributions” during a brief initial window, most fixed-rate cash ISAs don’t let you add funds during the fixed term.
Which are the best 5-year fixed-rate cash ISAs at the moment?
Our best fixed-rate cash ISAs are the highest interest rates available. To get the latest rates, we use Moneyfacts data, which covers nearly the full market of savings products and is checked and updated daily. We don’t include accounts from private banks.
All the cash ISAs in our list have savings protection – for most, this is the Financial Services Compensation Scheme (FSCS). Other schemes include that of NS&I, which is 100% backed by HM Treasury, and the Gibraltar Deposit Guarantee Scheme.
- UBL UK – 5 Year Fixed Rate Cash ISA - 4.16%
- State Bank of India – 5 Year Cash ISA Fixed Deposit - 4.15%
- Close Brothers Savings – 5 Year Fixed Rate Cash ISA - 4.15%
- United Trust Bank – Cash ISA 5 Year Bond - 4.05%
- Principality BS – 5 Year Fixed Rate Cash ISA (Issue 328) - 4.02%
An overview of our 5-year fixed-rate cash ISA comparison
| Rates up to | 4.16% AER |
|---|---|
| Number of accounts | 30 |
| Minimum investment | £1 |
| Opening options | Branch, website, mobile app, post, telephone |
Pros and cons of 5-year fixed rate cash ISAs
Pros
- By committing to a 5-year term, you’re likely to be able to access some of the best savings rates going.
- With the a cash ISA wrapper, your interest will be tax-free.
- Even if wider savings market rates go down, your fixed rate won’t.
- In a pinch, you would be able to withdraw the funds if you had to (but you would incur a financial penalty).
Cons
- 5 years is a long time, and to get the benefits, you’ll need to leave the money to grow for the duration.
- If market interest rates go up over the next few years, yours won’t.
- You can’t “top up” the acccount during the 5-year fixed term.
Bottom line
A 5-year fixed-rate cash ISA is a bit of a commitment, but can unlock some of the best savings rates going.
If you don’t have any money invested in stocks and shares, then that’s an alternative worth considering, because even by committing to a 5-year term you might not beat current levels of inflation. The big downside when investing in stocks and shares is that you risk losing money, but if you’re flexible about when you “cash out”, you can mitigate this.
But if you do already have some funds invested in stocks and shares, and simply want a risk-free safe haven for a lump sum, then a fixed-rate cash ISA is a sensible option.
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circ*mstances when you compare products so you get what's right for you.
