Best ISA Rates - 4 Year Fixed
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A four-year fixed ISA works in the same way as any other fixed ISA.
You deposit a sum of money into the ISA for a four-year term and, because the interest rate is fixed, the return on your money is guaranteed. And, as with any ISA, you won’t need to pay tax on this interest. The tax benefits of ISAs depend on your personal circumstances and may change in the future.
Some four-year ISAs only allow you to make one deposit upon opening, while others allow you to add to your account for a limited period.
However, it’s important to think about how much you deposit because, if you want to withdraw your money before the end of the four-year term, you will face a penalty. This is usually a loss of interest.
Once the four-year term ends, you can choose what to do with your money. The provider will contact you with some available options and, if you do nothing, your savings will often be moved into a variable rate ISA.
Everyone has an ISA allowance of £20,000 that they can deposit across one or more ISAs each tax-year.
Some of the reasons you may want to choose a four-year fixed rate ISA include:
Four-year ISAs work by asking you to deposit a lump sum of money that must remain untouched for four years. Here’s a closer look at what it involves, from setting it up to how interest payments work.
You can manage the account via any means offered by the provider – online or app management is often available, though some still ask you to manage via phone, post or in branch. If you need to access your funds (bearing in mind the withdrawal or transfer penalty) you’ll need to notify your provider, and will need to follow specific ISA transfer rules.
Interest is typically paid annually, though you may find other options available, such as monthly, quarterly or on maturity. Check whether interest will be compounded or paid to another account – the former option allows you to benefit from compound interest, while the latter means you could receive a regular income from your savings.
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:
Not suitable for:
Let’s say you’ve got a £5,000 lump sum that you want to save in a four-year ISA. Based on an interest rate of 4%, our lump sum savings calculator shows that you’d have £5,849.29 at the end of the term, of which £849.29 would be interest.
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.
Choosing the best four-year ISA relies on careful comparison of the available options. You’ll need to consider the following factors:
Instead of a four-year ISA, you could consider a five-year ISA. This means you won’t be able to access your money for an additional year, but you will typically have a wider range of accounts to choose from. They may also pay higher rates than four-year ISAs.
Or, if you prefer to lock away your money for a shorter period, you could consider a three-year ISA or a two-year ISA. For an even shorter-term, one-year ISAs are a popular option for savers.
If you want to be able to draw on your savings when needed, there are easy access ISAs and notice ISAs to choose from.
Usually, no. Most expect you to deposit a single lump sum, without allowing further deposits at a later date. Some may permit further additions for a short period – typically for the first 14 days, or while the particular issue remains open – but not always, so make sure to check the conditions of the account.
You’ll typically need to pay an early access penalty if you want to access your money early, which will usually be loss of interest. Not all providers will allow partial withdrawals either, so you may be expected to transfer the full amount elsewhere and close the account afterwards.
No. Cash ISAs are fee-free.
Yes, though you’ll need to follow specific transfer rules in order to maintain your funds’ tax efficiency, and will need to pay any relevant access penalties. Also, make sure to check that your preferred account permits transfers in, as not all do.
This will depend on both the interest rate you’re getting, and the level of inflation at the time. Provided your ISA rate is above the rate of inflation, then you’ll be able to beat it. However, the risk with a long-term ISA is that inflation could rise above your savings rate, and so over time the purchasing power of your savings can reduce.
Find out more about how inflation works and its impact on your finances.
Yes. There is now no limit on the number of ISAs you can have, so even if you’ve got another fixed rate ISA elsewhere, there’s nothing to stop you opening a four-year version as well. However, bear in mind that some providers may have their own rules about how many of their ISAs you’re allowed to hold, and you’ll also need to make sure you stick within your annual contribution limit of £20,000 across all ISA pots.
Find out more in our guide: How many ISAs can I have?
No. ISAs can only be opened by individuals.