With a 5 year fixed rate ISA savers know exactly how much they stand to earn from interest accumulation, in return for locking their cash into the account for a 60 month period.
Like most fixed rate ISAs with a 5 year option you are required to lock your money into the account for that time frame. Over the 5 year period of the account the interest rate paid upon it will be fixed, so it is possible to tell exactly how much you will earn.
Locking your savings into a fixed rate is also a way savers can try to protect themselves from interest rates falling in the future, however if interest rates rise there is the risk that their interest rate will become uncompetitive.
How interest is calculated upon fixed rate accounts can vary by provider, some will do pay interest monthly while others may do so quarterly or annually.
Some fixed rate ISA permit early full or partial withdrawals, however these are normally subject to a penalty based upon a set amount of days worth of interest accumulation. This means that savers could actually get back less than they originally deposited in the account.
Fixed rate accounts commonly have a minimum amount that must be deposited in order to open, or transfer into, the account.
Fixed Rate ISAs are also available for other time spans such as; 1, 2 and 3 year products. As a general rule the longer the account requires money to be locked into the ISA for the better the rate of interest offered.
Other types of Cash ISA include Instant access plans. These types of ISA usually allow the account holder to make unlimited free withdrawals from the account, without having to pay an interest penalty. They usually however offer a variable interest rate rather than a fixed one.
ISA rules only permit each eligible person to open up to one Cash ISA in each tax year (although it may be possible to transfer an ISA). This means it’s a good idea to shop around to try and find a product that fits with how you want to save. You can use the tables on this website to view a selection of different types of ISA from various providers and follow the links to find out more or apply.