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Leading the way among two-year fixed rate bonds is Bank of London and The Middle East (BLME). From a minimum deposit of £25,000, Premier Deposit Account (Anticipated Profit Rate) pays an expected profit rate of 2.10% yearly. Neither additional deposits nor early access to funds are allowed on this online-only bond, which can only be opened if you already have or are happy to open a BLME current account. The bank is covered by the Financial Services Compensation Scheme (FSCS).

Paying the top return if you want to secure a regular income over the long term is Vanquis Bank. From a minimum deposit of £1,000, the five-year version of Vanquis Bank Savings pays an annual rate of 2.53% on a monthly basis. Neither additional deposits nor early access to funds are allowed on this bond, which must be opened online and can then be operated by post and over the
phone as well.

Robin Squirrel

One-year ISA now best

Increasing rates and now paying the market-leading return among one-year fixed rate ISAs is OakNorth Bank. From a minimum deposit of £1,000, Fixed Rate Cash ISA pays an annual rate of 1.52% on a monthly basis. Transfers in from cash ISAs are welcome and additional deposits are allowed for 30 days after opening. It is also possible to access funds early, although 90 days’ interest will be lost. The same interest penalty applies if you transfer away from this ISA, which must be opened online and can then be operated over the phone as well.

Notice this top ISA

New this week and moving to the top of two cash ISA charts this week is Coventry BS. From a minimum deposit of just £1, 30 Day Notice ISA (5) pays 1.25% yearly, the market-leading return over this notice period. Additional deposits are allowed at any time, and transfers in from current tax year cash ISAs are welcome. Funds can be accessed without serving the notice period by foregoing 30 days’ interest. If you want to transfer away, there is the choice of giving 30 days' notice, or waiving this and losing 30 days' interest instead.

From the same deposit of £1, Fixed Rate ISA (55) 31.5.20 pays a highly competitive 1.55% yearly over a term of just over two years, while Fixed Rate ISA (56) 31.5.22 pays a market-leading 2.00% yearly for a term of just over four years. Additional deposits are allowed for 14 days after opening, for as long as the issues remain open, or until 19 April, whichever is longer. For the fixed rate ISAs, cash ISAs from any tax year can be transferred in. If you want to access funds early, 120 or 180 days’ interest will be lost respectively, and the ISA will be closed, with the same interest penalties applying if transferring out. All of the ISAs can be opened and operated in branch, by post, over the phone or online.

Market-leading access ISA

Launched this week and now paying the top return among easy access ISAs without any withdrawal restrictions is Shawbrook Bank. Requiring a minimum deposit of £1,000, Easy Access Cash ISA Issue 2 pays 1.25% yearly, free from the added complication of a short-term bonus. Additional deposits and transfers in are welcome at any time, and there are no restrictions on withdrawals or penalties for transferring out.

Looking for an Easy Access Cash ISA? See Latest Top Rates in left hand column
Savers Friend In Focus

Regular Savings Accounts

Regular savings accounts tend to offer better rates for a commitment to deposit a minimum amount each month, but generally have more restrictions than standard accounts. Payments often have to remain within the minimum and maximum monthly contributions allowed.

Currently paying the joint top rate among fixed rate regular savings accounts is first direct. Paying 5.00% for one year, Regular Saver allows a minimum payment of £25 up to a maximum of £300 per month. Twelve consecutive deposits are required and no withdrawals are allowed on this account, which is only available to first direct 1st account customers. The account can be opened over the phone and online and then operated over the phone.

At the same time, Shawbrook Bank has launched a new issue of its easy access account , which sits just below the market-leaders in this chart. From an opening deposit of £1,000, Easy Access – Issue 11 pays 1.25% yearly, and welcomes additional deposits at any time. There are no restrictions on withdrawals, other than they must be for a minimum of £500 and are made via a nominated account. Both accounts must be opened online, but can then be operated over the phone as well.

Fixed rates near top

Reviewing rates and remaining near the top of their respective charts are these short-term fixed rate bonds from Investec Bank plc. From a minimum deposit of £25,000, 1 Year Fixed Term Deposit now pays 1.85% yearly, while its 18-month counterpart returns 1.90% yearly. Additional deposits and early access to funds are not allowed on these bonds, which also require an Investec Easy Access Account to be opened so transactions can be made. The bonds must be opened online, but can then be operated over the phone as well. For income-seekers, versions of the bonds that pay slightly lower annual rates on a monthly basis are available too.

Fixed ISA on the up

Reissued this week and sitting just shy of the market-leading two-year fixed rate ISAs is this tax-free account from Virgin Money. From a minimum deposit of £1, Fixed Rate Cash ISA Issue 352 now pays 1.66% yearly. Additional deposits are allowed for up to 30 days after the ISA is opened and transfers in are welcome too. It is also possible to access funds early on the loss of 90 days’ interest, with the same penalty applying if you wish to transfer out. The ISA can be opened in branch, by post and over the phone, and then operated in branch and by post. An online-only version is also available, which pays the same rate, as is a version that pays a slightly lower rate on a monthly basis, if you’d prefer to secure a regular income instead.

ISA access appeals

Increasing rates and now paying a near market-leading return if you want an easy access ISA without any withdrawal restrictions is Al Rayan Bank. From a minimum deposit of £50, Instant Access Cash ISA pays an expected annual profit rate of 1.22% on a monthly basis. Additional deposits, transfers in and withdrawals are allowed at any time, while transfers out are penalty-free.

At the same time, Al Rayan Bank improved the expected profit rate on its 12 Month Fixed Term Cash ISA to 1.50% quarterly, the second-best return over the one-year term. Additional deposits can be made for 30 days after opening, and transfers in are welcome, but early access to funds is not allowed. If you wish to transfer out, a reduced profit rate will be paid for up to 90 days. Both ISAs can be opened and operated in branch, by post, over the phone, online or by mobile app.

Rate rise for JISA

Raising the rate on its Junior ISA this week is National Savings & Investments (NS&I). From a minimum deposit of just £1, the online-only Junior ISA now pays 2.50% yearly. Available up to the age of 17, the account permits the transfer in of both Junior ISAs and Child Trust Funds, while there is no penalty to transfer out.

Top new offshore bond

New this week and paying the market-leading return for an offshore bond of this term is Skipton International Ltd. From a minimum deposit of £10,000, Fixed Rate Bond pays 1.40% yearly until it matures on 15 October 2019. Neither additional deposits nor early access to funds are allowed on this bond, which can be opened and operated in branch, by post and over the phone.

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Rachel Thrussell

Ask Rachel

Working in the financial industry for over 30 years, Rachel Thrussell is the leading independent expert on UK savings products. Her views are constantly in demand from both the industry and the press.

Is an ISA still the best place to save, as it seems to me that similar non-ISA accounts pay far more in interest?

It is true that the top two-year bond, from Bank of London and The Middle East, for example, pays 2.10%, while the best two-year ISA pays 1.70% (Al Rayan Bank), and with the Personal Savings Allowance (PSA) meaning basic rate taxpayers can earn up to £1,000 in savings income tax-free (£500 for higher rate taxpayers), the obvious advantage that ISAs once held in respect of being tax-free has been diluted. What ISAs still have in their advantage is that the tax benefits built up in them are cumulative, meaning savers can ensure that ever larger sums are sheltered from tax year-on-year. While interest rates are relatively low, the PSA is currently adequate for most to avoid paying tax on their savings without using an ISA. However, if savings rates continue to rise, tax could quickly become an issue. It is also worth noting that cash ISAs typically allow more access to funds.

Get your savings questions answered by Rachel by emailing rachel@saversfriend.co.uk We regret we cannot answer emails personally

This week's
average rates

How do your savings compare?
No Notice 0.49%
Notice 0.80%
Cash ISA 1.17%
1 Year Fixed Rate Bond 1.22%
2 Year Fixed Rate Bond 1.46%
3 Year Fixed Rate Bond 1.66%
4 Year Fixed Rate Bond 1.94%
5 Year Fixed Rate Bond 1.99%
21 March 2018

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Wizard Squirrel

Alternative sources of income

Retirees look to property wealth ahead of pensions

Retirees are taking more money from their properties first and leaving their pensions untouched for longer, as the popularity of equity release as an alternative source of retirement income continues to grow. According to the latest Equity Release Council data, record equity release lending of £3.06bn in 2017 saw withdrawals of housing wealth gain ground on flexible pension payments as a way of financing retirement. By the end of 2017, 56p of housing wealth was being unlocked by the over-55s for every £1 of pension savings withdrawn – a significant jump from the 29p reported in spring 2016.

Thankfully, the growing demand for equity release in recent years has been met by greater competition from providers, with the number of products available having grown from 69 in January 2017 to 86 a year later. This competition has, in turn, driven greater innovation in the market, with over two-thirds (70%) of equity release products now offering the option to make ad-hoc, penalty-free voluntary or partial repayments of their loan. This can help minimise the build-up of interest and even reduce the size of the loan over time. Also in its favour, the average cost of equity release is some 0.23% lower than a year ago, even though most borrowing rates are on the rise.

All of this considered, it is perhaps unsurprising that the popularity of equity release continues to grow, with the proposition now attracting twice as many new customers as five years ago. Overall, the volume of new customers taking out equity release plans in 2017 was almost 10,000 more than in the previous year, with the number of people unlocking housing wealth for the first time increasing by a third. More new equity release plans were agreed in the second half of 2017 than in the whole of 2012. “With record levels of market growth and more flexible product options than ever before, using housing wealth to boost retirement income is becoming firmly established as a viable and compelling solution to consumer funding needs,” said David Burrowes, chairman of the Equity Release Council. “Looking forward, we expect the need for new sources of income in retirement will continue to grow as many people will be unable to rely on pressured pension pots.”

While equity release continues its march towards the mainstream, there is a lot for interested homeowners to consider before making a firm commitment. For instance, equity release will reduce the value of an estate, so the impact on inheritance has to be considered. It may also affect an individual’s tax position and entitlement to means-tested benefits, and for couples in particular, it is important to understand the rules regarding moving into long-term care. For all these reasons and more, seeking advice before taking equity release is essential, as is including wider family members in any discussions. Nevertheless, in the right circumstances and for the right people, there is little doubt that more and more homeowners are recognising the valuable role that property wealth has to play in supporting retirement income.

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