Investec enters cash ISA market with top rate for savers

Investec has launched its first fixed-rate cash ISA in 20 years, and is going head to head with other providers with one of the best deals as savers rush to maximise their annual allowances.

The South Africa-founded bank and wealth management group’s new one-year fixed cash ISA pays out 4.27% AER interest.

You can open the ISA with a minimum investment of £1,000.

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David Hunt, head of deposits at Investec, said: “The launch of our 1-Year Fixed Rate Cash ISA is a major milestone for Investec Save as we continue to expand options for savers.

“Demand for cash ISAs is growing with a record £14 billion deposited in April this year alone and fixed-rate accounts are particularly popular as they enable savers to secure a rate for a fixed period and not have to worry about any decreases.”

We look at who can get the ISA, how it works and how it compares to other best cash ISAs.

How Investec's ISA works

Interest on the Investec account is calculated daily and paid out annually.

As it is a one year fixed account, you need to leave your money untouched for a year.

Once the ISA is opened, you’ll have seven days to pay the minimum £1,000 deposit.

You won’t be charged a fee if you close your account within 14 days of opening it and any balance plus earned interest will be transferred to your linked account. Cancel your account after this window and a fee may be deducted from your balance equal to 90 days’ interest.

The account can be opened and managed online, via Investec’s website or its app.

If you’re a new Investec customer, you’ll need the sort code and account number of your UK current account to hand as this is linked to the ISA.

While some accounts do let you transfer in ISAs, Investec’s ISA is for new accounts only.

How does Investec’s cash ISA compare to other accounts?

Investec’s new ISA is the second best one-year fixed rate ISA on the market after Vida Savings, which is offering a marginally higher interest rate of 4.28% on its one-year bond.

But it is a smaller provider and you can open the account with a smaller deposit.

Vida ISA lets you invest with a lower minimum of £100 and the bank is also covered by the Financial Services Compensation Scheme (FSCS).

How to decide what savings account is best for you

While some of the best cash ISA rates are on one year fixed deals, this account may not be suitable for you if you are looking to withdraw money from it before the 12 month period ends.

If you think you may need easy access, then an easy access cash ISA is a better option, where you can earn as much as 4.45% via Plum, for example.

But, the rate is variable and could drop if the Bank of England cuts the base rate.

You can currently add up to £20,000 into an ISA, though there are Autumn Budget rumours that chancellor Rachel Reeves may reduce this allowance for cash ISA holders in a bid to get more savers to start investing with stocks and shares ISAs instead.