Cash ISAs offer a great incentive for savers young and old but unfortunately have a reputation for being complicated. This is mainly due to the changes ISAs underwent in April 2016, undergoing the biggest overhaul since they were launched in April 1999. In fact, ISAs are relatively easy to understand and take advantage of to make great savings. Here are some essential facts about fixed-rate ISAs to know before taking one out.
There’s a Maximum Limit
One of the main changes that affected ISAs was the maximum amount that can be saved in one. This covers fixed-rate ISAs, easy access and other options. For 2016/17 the maximum amount that can be saved in a fixed-rate ISA is £15,240. It doesn’t have to all be placed in just a fixed-rate ISA though, it can be split across many options.
Penalties for Early Withdrawals
The idea of placing your savings in a fixed-rate ISA is so that they remain untouched for the length of time that the ISA is active. Therefore, if you need to withdraw from it then most lenders will either reduced the fixed-rate interest or charge you a penalty for doing so. Only place money in a fixed-rate ISA that you can safely be without for a year or two.
They’re Tax Free
This is one of the most enticing aspects of fixed-rate ISAs, that they allow you to save tax free! For taxpayers of every bracket this makes them a great choice for consolidating your personal finances, whatever type of ISA you choose to take out.
Varying Open Rates
There are many different lenders offering ISAs, so you can expect to find variations in their terms and conditions to attract you to save with them. Some will allow you to open a fixed-rate ISA with a starting balance of just a pound, while others require a minimum of a £500 deposit to invest.
There Are Further Options Available
As well as standard fixed-rate ISAs, you can find easy access ISAs too. These have a lower rate of interest but do allow savers to make withdrawals without a penalty. Trackers, help to buy ISAs and more can also be found to suit particular needs.
Not to be Confused With…
Finally, ISA can also refer to the International Seabed Authority. Don’t get confused between the two, as one will allow you to make big savings, while the other will simply get you involved with looking after the ocean floor.