5 Year Fixed Rate Cash ISA Pays Same Rate As Standard 5 Year Fixed Rate Account

Written by Karen Bryan

Today for the first time in ages, you can earn the same rate of interest on a fixed rate Cash ISA as on a standard fixed rate savings account.

UBL is paying 2.65% on their five year fixed rate Cash ISA. The highest rate which I could find for a standard five year fixed rate savings account is the same 2.65% with Vanquis Bank Savings.

In the recent past, standard fixed rate savings account have paid an interest rate of around 20% higher than fixed rate Cash ISAs.

To me, it’s a welcome step in the right direction.

After the introduction of the annual £1000 Personal Savings Allowance, enabling basic rate tax payers to earn up to £1000 a year tax free in interest from savings, the interest rates on Cash ISA account started to drift down.

However if you save over decades and interest rates start to increase, you could find that the interest that you earn over a year could be more than £1000 and you’d start being taxed on any interest earned about the £1000 threshold.

Whereas, if your savings is in Cash ISA savings account, all interest paid will be tax free. This could be particularly beneficial during retirement to provide a tax free top up to pension income, if your pension income is above your annual personal tax allowance.