Nationwide has increased the interest rates across 12 Cash ISA and fixed savings accounts. Customers have four different term lengths to choose from, ranging from a one-year term at 4.75% to a five-year term at 5%.
The new interest rates are exactly the same for both ISAs and the bonds. However, ISAs allow savers to earn tax-free interest on their savings, whereas interest earned on bonds may be liable to tax.
Potential earnings on fixed terms
If a saver locks away £1,000 in the 5 Year Fixed Rate Cash ISA or bond, they could earn £276.28 over the term. If they save the same amount in a one-year account, paying 4.75%, they would earn £47.50 in interest.
The rate is fixed and will not change for the term of the account. However, withdrawals are not permitted, so the account holder must be comfortable with locking their money away.
Nationwide's new rates
Richard Stocker, head of savings at Nationwide, said: “We’re boosting rates across our Fixed Rate Bonds and Cash ISAs. With a range of terms from one to five years and rates of up to 5.00%, customers can choose the option that best suits how long they want to put their money away for.
"These increases underline our promise that our Fixed Rate Cash ISA rates match or beat the equivalent Fixed Rate Bond rate, while savers who prefer face-to-face service can continue to access our fixed rate products in branch.”
The accounts work slightly differently. The ISA allows people to earn tax-free interest on their savings. People can deposit up to £20,000 per year across all ISA accounts.
However, a normal savings account may be liable to tax. Basic-rate taxpayers can earn up to £1,000 in interest on their non-ISA savings each tax year without paying any UK income tax on it, a limit known as the Personal Savings Allowance. Higher-rate taxpayers can earn £500, while additional-rate taxpayers don’t qualify for the PSA.
Branch and online options
Nationwide is offering both a branch and online version for these accounts, depending on how customers want to bank.
Nationwide's new products and rates include Fixed Rate ISAs: 1 Year Fixed Rate Cash ISA at 4.75% AER/Tax-free (fixed), 2 Year at 4.85%, 3 Year at 4.90%, and 5 Year at 5.00%. Fixed Rate Bonds (Branch and Online versions) offer the same rates: 1 Year at 4.75%, 2 Year at 4.85%, 3 Year at 4.90%, and 5 Year at 5.00% AER/gross a year (fixed).
How do other accounts compare?
Aldermore is offering both a Five Year Fixed Rate Account and a five-year ISA paying 5.25%, which is slightly higher than Nationwide's deal. OakNorth Bank is paying 5.12% on its one-year Fixed Term Savings Account. The Zopa Smart ISA - 1 Year Fixed Term ISA pot is paying 5% interest.
