As we approach the end of the tax year, a massive £53.9 billion worth of cash ISA savings held in fixed-term accounts are about to mature.
Analysis from Paragon Bank, based on CACI data, reveals that this large sum is set to mature between January and April 2025.
Of this total, £36.4 billion is locked in one-year fixed accounts, while £15 billion is tied up in terms ranging from 18 months to two years.
The Surge in Cash ISA Balances
Savers have been actively trying to protect their interest earnings from higher taxes.
Last year, figures from HMRC indicated that £10.4 billion was generated as savers breached their Personal Savings Allowance (PSA).
This is a significant increase from the £1.4 billion recorded in 2021/22.
The surge in ISA balances has outpaced non-ISA savings between January and October 2024, with cash ISAs growing by £38.5 billion compared to just £9.5 billion in non-ISA accounts.
Derek Sprawling, Paragon Bank’s Managing Director of Savings, noted that 2024’s ISA season was one of the busiest on record, with a particularly strong start to the tax year.
What’s on Offer for Fixed ISA Savers?
Savers whose fixed ISAs are maturing in the coming months are unlikely to find better deals than last year.
Due to the recent cuts in the Bank of England’s base rate, interest rates on fixed ISAs have dropped significantly.
Shawbrook Bank currently offers the highest rate for one-year fixed ISAs, providing 4.53% interest on balances over £1,000, followed by Virgin Money, Close Brothers Savings, and Secure Trust at 4.52%.
In contrast, rates in January 2024 were much higher, with Virgin Money offering 5.25% interest.
Shawbrook Bank, Dudley BS, Post Office Money, and others were offering around 5% for similar terms.
For two-year fixed ISAs, the highest current rate is 4.43% from Hodge Bank and Castle Trust Bank, while several others offer rates just under 4.5%.
These rates are still below what was offered at the beginning of 2024.
Proactive Steps for Savers
If your cash ISA is maturing soon, it’s important to act quickly to secure the best possible return.
Rachel Springall from Moneyfactscompare advises savers to keep an eye on falling rates and to be proactive about finding the best deals.
While fixed-rate accounts have seen cuts, savers with maturing five-year bonds might find that current rates are significantly higher than when they originally invested.
Challenger banks are working hard to compete with the big players, often offering attractive rates as they seek funding for future lending.
However, as we move further into 2025, you may see a mix of rate increases and cuts across the top tables.
What to Do When Your ISA Matures
Sprawling recommends using your £20,000 ISA allowance before the end of the tax year, especially if you’re looking to open a new account or transfer your savings to benefit from higher rates.
Keep in mind that popular products may be pulled from the market or restricted to existing customers as providers manage high demand.
If you’re considering transferring your ISA balance, avoid withdrawing the money yourself to retain the tax advantages that come with an ISA.
Also, don’t forget to consider how your income level affects your tax status, and how much of the Personal Savings Allowance (PSA) you are entitled to.
Basic-rate taxpayers can earn up to £1,000 of interest tax-free, while higher-rate taxpayers can earn £500.
Additional-rate taxpayers are not eligible for the PSA.
Final Thoughts
As fixed-rate ISAs mature, it’s important to make informed decisions on where to place your money next.
With interest rates fluctuating, savers should stay vigilant and act early to make the most of the available options.
While rates have dropped compared to a year ago, savvy savers can still find competitive deals, especially by making the most of their ISA allowances before the tax year ends.
This article was published on TDPel Media. Thanks for reading!
Share on Facebook «||» Share on Twitter «||» Share on Reddit «||» Share on LinkedIn