Best 4 Year Fixed Rate Cash ISAs

What is a four-year fixed rate cash ISA?

A four-year fixed rate cash ISA is a type of Individual Savings Account (ISA) that offers an interest rate guaranteed to remain the same over the course of four years. Like other types of ISAs, any interest earned is also tax-free (although keep in mind that tax benefits depend on your personal circumstances and may change in the future).

How does a four-year fixed rate cash ISA work?

Four-year fixed rate ISAs work in much the same way as other savings accounts; any money deposited will automatically accrue interest.

Like most fixed savings accounts, the interest rate you receive won’t change over the four-year term – meaning your returns won’t be affected by market fluctuations. However, in exchange, you typically won’t be able to access your cash without facing a penalty until after the account matures (i.e. when the four-year term comes to an end).

And, as with all ISAs, any returns are automatically tax exempt.

How to open a four-year cash ISA:

You can open a four-year ISA online, in branch, by post, over the phone or via mobile app with a minimum deposit ranging from as little as £1 to over £10,000 (note: this varies depending on the particular account and provider – for more information, select ‘view further details’ next to a listing on our chart).

As well as your initial deposit, you may also need to provide:

• Personal information (including your full name, date of birth and National Insurance number)
• Proof of your address and identity (e.g. passport or driving licence)
• Contact details (such as a phone number and/or email address)

Before applying for a four-year fixed rate ISA, it’s important to check whether you meet any eligibility criteria (such as having a linked current account with the provider or living in a certain location).

How to manage a four-year cash ISA:

You can manage your four-year ISA via any means allowed by the provider. This might include online, in branch, by post, over the phone or via mobile app.

Can I add more money to my 4-year fixed rate ISA?

Some four-year fixed ISAs allow you to add more money to your account for a short window after opening (which usually ranges from seven to 30 days) but this isn’t always the case, as others can prohibit further additions entirely. Therefore, it’s important to check the small print and consider your opening amount carefully.

What happens if I need access to my money early?

You’ll usually face a loss of interest penalty if you need to withdraw money from your four-year ISA before the term ends. Not all providers allow partial withdrawals, so you may also be expected to transfer the full amount elsewhere and close the account afterwards.

Can I transfer my ISA to another provider?

Yes, you can transfer your four-year ISA to another provider. However, it’s important to follow specific transfer rules to make sure the money in your account keeps its tax-free status. Learn more about how to transfer an ISA.

While all providers must allow ISAs to be transferred out, bear in mind early exit fees may still apply. You should also make sure your new provider accepts transfers in before starting the process (as not all do).

Interest payments

Four-year fixed ISAs either pay interest at regular intervals (such as monthly, quarterly, yearly or on anniversary) or when the account matures. Interest can either be compounded (i.e. added back into the account to earn interest itself) or “paid away” into another account.

Earning monthly interest from a four-year ISA may appeal to savers who want to supplement their usual income. But, if you choose this option, remember that you’ll likely take home less interest overall than if it was compounded or paid yearly. Find out more about compound interest.

Why choose a 4-year fixed rate ISA?

Some of the reasons you may want to choose a four-year fixed rate ISA include:

• Guaranteed returns. Because your rate is fixed, you’re guaranteed to get the returns you expect. This can provide a great level of security, particularly during times of interest rate fluctuation, as even if rates fall elsewhere, yours will remain unchanged for the full four-year term.

• Tax-free growth. As with all ISAs, four-year versions offer tax-free growth which can make them particularly suitable for those who may use up their Personal Savings Allowance.

• Great for goal-setting. Putting money aside for four years can be ideal if you’ve got medium-term savings goals, such as a deposit for a first home, a wedding or school/university fees for your children. By locking your money away there’s no temptation to spend it, which means you could have a nice nest egg at the end of the term that could go a long way towards meeting your goals.

When is a 4-year fixed rate ISA a good idea?

A four-year ISA can be a great idea if you’ve got medium-term savings goals and a lump sum of money you’re comfortable locking away for the full term. It can be particularly suitable if you’ve got substantial savings elsewhere and could therefore breach your personal savings allowance, as you’ll still be able to benefit from tax-free growth.

Suitable for:

• Those who are comfortable locking their money away, and have sufficient accessible savings elsewhere (such as in an easy access account).
• Savers who want guaranteed returns with an interest rate that won’t change for the full four years.
• Those with substantial savings in non-ISA accounts and/or higher rate taxpayers who have limited options for tax-free growth.
  
  

Not suitable for:

• Savers who don’t have a lump sum of money to lock away and instead want to save smaller amounts on a regular basis, in which case easy access or notice ISAs may be more suitable.
• Those who may need to access their funds.

Should I consider fixing for a shorter term?

It’s up to you to decide whether a four-year ISA is right for you, or if you should fix for a shorter term.

It may be worth opting for a short-term fixed ISA if you’re not comfortable locking away your money for as long as four years. You should only consider putting savings into a longer-term fixed ISA if you have sufficient savings to draw on should you face an emergency expense or a loss of income, for example.

You may also want to think about the direction that interest rates could go in the future. If you lock your money away for a long period, you could miss out on a higher rate of interest if interest rates rise.

But, on the other hand, if interest rates fall, locking into a longer-term fixed ISA before they drop could mean you get a better return than if you chose a shorter-term ISA.

Ultimately, if you can afford to do so, it may be worth putting your savings in a combination of short-term and long-term fixed accounts, as well as easy access accounts.

How to choose the best 4-year fixed rate ISA?

Choosing the best four-year ISA relies on careful comparison of the available options. You’ll need to consider the following factors:

• The interest rate will probably be your most important consideration, as over the course of four years, even a small difference in rate could significantly alter the amount you’ll receive in interest. Using the AER is arguably the best way to compare the options; you can find out more in our guide to AER, gross rate and net rate. Alternatively, start your search for the best fixed rate 4 year cash ISA using our chart above.

• Access penalties. All fixed ISAs will impose some form of penalty for access, but the amount will vary between providers. Typically, you’ll be looking at around a year’s worth of lost interest, but some providers impose a set percentage reduction, and you’ll often be expected to close or transfer the account too.

• Opening criteria. Alongside typical ISA requirements (such as age, residential status and minimum deposits), there may be additional criteria to adhere to as well, such as the need to have a linked current or savings account. Make sure this suits your financial needs.

• Account opening. For savers who don’t have branch access, the option to open an account online or via mobile app can be the key consideration. Use our chart to look for those that have an opening method to suit.

• Provider reputation. It’s important to bank with a provider you trust, and you can check their consumer satisfaction results via the Competition and Markets Authority (CMA). You’ll often find that smaller, challenger banks come out on top in these surveys; find out more about challenger banks and why they’re worth considering.