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  • FIRST POST
    • BOBS
    • By BOBS 3rd Oct 17, 9:33 AM
    • 2,733Posts
    • 2,084Thanks
    BOBS
    ISA -v- 5 year fixed rate
    • #1
    • 3rd Oct 17, 9:33 AM
    ISA -v- 5 year fixed rate 3rd Oct 17 at 9:33 AM
    Just a quick question before I lock my hard earned £££ away .

    ISA savings currently sitting at a paltry 0.25% interest. Have applied for Tesco fixed rate 2.35 for five years account .

    Is there any downfall to doing this fixed rate account instead of ISA - apart from the obvious not being able to access money ??
Page 1
    • IanSt
    • By IanSt 3rd Oct 17, 10:10 AM
    • 80 Posts
    • 44 Thanks
    IanSt
    • #2
    • 3rd Oct 17, 10:10 AM
    • #2
    • 3rd Oct 17, 10:10 AM
    Have you looked at https://www.moneysavingexpert.com/savings/savings-accounts-best-interest.

    How much money are you going to put in and have you already fully used the various current accounts that bring in more than that 2.35%? E.g. you can get 5% at Nationwide for at least some of your money.

    At 2.35% I would be very wary about putting it away for 5 years when you can get just under 2% for fixing a year, and just over 2% for two years.

    With regards to leaving the money in the ISA, that would depend on how much money you have there already and how much you are likely to be adding. The current low rates will not remain low for ever and there may come a time when the ISA interest would be more than the tax free amount you can currently receive - assuming you are a normal basic rate tax payer.

    But if you do leave the money in the ISA then definitely look to move it to an ISA provider account that is paying more. Take a look at http://www.moneysavingexpert.com/isas/.
    • Eco Miser
    • By Eco Miser 3rd Oct 17, 1:53 PM
    • 3,090 Posts
    • 2,856 Thanks
    Eco Miser
    • #3
    • 3rd Oct 17, 1:53 PM
    • #3
    • 3rd Oct 17, 1:53 PM
    Is there any downfall to doing this fixed rate account instead of ISA - apart from the obvious not being able to access money ??
    Originally posted by BOBS
    IF interest rates generally rise above 2.35%, you are stuck getting just 2.35%.
    But it's a big IF.
    Eco Miser
    Saving money for well over half a century
    • redmalc
    • By redmalc 3rd Oct 17, 6:24 PM
    • 1,256 Posts
    • 477 Thanks
    redmalc
    • #4
    • 3rd Oct 17, 6:24 PM
    • #4
    • 3rd Oct 17, 6:24 PM
    Eco I asked myself the same question in 2013 and thought the interest rates would increase but I am now looking at 1.4% with Charter which is still rubbish
    • BOBS
    • By BOBS 3rd Oct 17, 7:11 PM
    • 2,733 Posts
    • 2,084 Thanks
    BOBS
    • #5
    • 3rd Oct 17, 7:11 PM
    • #5
    • 3rd Oct 17, 7:11 PM
    Have you looked at https://www.moneysavingexpert.com/savings/savings-accounts-best-interest.

    How much money are you going to put in and have you already fully used the various current accounts that bring in more than that 2.35%? E.g. you can get 5% at Nationwide for at least some of your money.

    At 2.35% I would be very wary about putting it away for 5 years when you can get just under 2% for fixing a year, and just over 2% for two years.

    With regards to leaving the money in the ISA, that would depend on how much money you have there already and how much you are likely to be adding. The current low rates will not remain low for ever and there may come a time when the ISA interest would be more than the tax free amount you can currently receive - assuming you are a normal basic rate tax payer.

    But if you do leave the money in the ISA then definitely look to move it to an ISA provider account that is paying more. Take a look at http://www.moneysavingexpert.com/isas/.
    Originally posted by IanSt
    Thanks for advice - will look at shorter fixed rate. I have posted before for advice but am so scared of risk etc and would rather be conventional and stick to what I know. Have £25k
    • Dazed and confused
    • By Dazed and confused 3rd Oct 17, 8:53 PM
    • 1,769 Posts
    • 769 Thanks
    Dazed and confused
    • #6
    • 3rd Oct 17, 8:53 PM
    • #6
    • 3rd Oct 17, 8:53 PM
    All your interest on this 25k, roughly £600/year, will now be taxable income so depending on your personal circumstances you could have additional tax to pay as a result, effectively reducing your return.

    If this is your only interest and your total income increasing doesn't affect anything else then it may be taxed at 0% but you could just as easily have extra to pay if you fall into particular groups (child benefit charge, income over £100k or elderly married pensioner spring to mind).
    • BOBS
    • By BOBS 3rd Oct 17, 9:27 PM
    • 2,733 Posts
    • 2,084 Thanks
    BOBS
    • #7
    • 3rd Oct 17, 9:27 PM
    • #7
    • 3rd Oct 17, 9:27 PM
    All your interest on this 25k, roughly £600/year, will now be taxable income so depending on your personal circumstances you could have additional tax to pay as a result, effectively reducing your return.

    If this is your only interest and your total income increasing doesn't affect anything else then it may be taxed at 0% but you could just as easily have extra to pay if you fall into particular groups (child benefit charge, income over £100k or elderly married pensioner spring to mind).
    Originally posted by Dazed and confused
    Household income around £30k with 3 children
    • Dazed and confused
    • By Dazed and confused 3rd Oct 17, 9:30 PM
    • 1,769 Posts
    • 769 Thanks
    Dazed and confused
    • #8
    • 3rd Oct 17, 9:30 PM
    • #8
    • 3rd Oct 17, 9:30 PM
    Unless born in the 1930's don't think it will cost you any extra tax.

    As it is going to be over £300 it could affect tax credits if you claim them.
    • scoot65
    • By scoot65 3rd Oct 17, 10:32 PM
    • 123 Posts
    • 36 Thanks
    scoot65
    • #9
    • 3rd Oct 17, 10:32 PM
    • #9
    • 3rd Oct 17, 10:32 PM
    IF interest rates generally rise above 2.35%, you are stuck getting just 2.35%.
    But it's a big IF.
    Originally posted by Eco Miser
    I see what you did there!! lol
    • BOBS
    • By BOBS 4th Oct 17, 9:32 AM
    • 2,733 Posts
    • 2,084 Thanks
    BOBS
    Thanks everyone for ongoing advice.
    Further research on this site this morning I have came across virgin fixed rate ISA -
    https://uk.virginmoney.com/savings/find/5_year_fixed_rate_cash_e_isa_issue_268/overview/
    5 years at 2.15% - plus added bonus the fact that if
    """IF - Eco Miser """
    interest rates do rise I am able to move my money with the penalty of 180 days of interest . Plus the interest isnt taxable and therefore wont affect what little tax credits we get.
    Thinking that this sounds a much better option ?
    • IanSt
    • By IanSt 4th Oct 17, 10:42 AM
    • 80 Posts
    • 44 Thanks
    IanSt
    You possibly could get a bit more money through other accounts, but the 5 year Virgin ISA does look to be a simple way to increase your interest and gives you the flexibility to move it should interest rates start moving upwards. I did a similar thing into a Coventry ISA a few years ago and haven't regretted it.
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