Santander hikes rates on its fixed rate cash ISAs and offers £50 for switching

Cash ISAs can be a great tool if you’re looking to shield your savings from the tax man. However, providers have been slow to pass on recent interest rate rises by the Bank of England (BoE) on to ISA savers. Compared to the best savings accounts on the market, most cash ISAs look pretty unappealing. 

Still, as Sarah Coles at Hargreaves Lansdown says, “You tend to earn a slightly lower interest rate on a cash ISA than on the equivalent savings account, but it’s not dramatically lower, so for an awful lot of people it will be a price worth paying.”

The top easy-access cash ISA by savings and investing app Moneybox is offering 4.75% AER. 

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The good news is we are starting to see competition return to the ISA market on fixed accounts, with Shawbrook offering 5.83% AER on its one-year fixed cash ISA and now high-street giant Santander has stepped into the ring with a new offer as well as cash sweetener for savers.  

What can I earn on Santander’s new ISA rates? 

Santander has hiked the rate on its one-year and two-year fixed rate ISA products. Here’s what you can earn.  

If you have already maximised your annual £20,000 ISA limit in the current tax year, you won’t be eligible to open this ISA. 

As well as a £500 minimum deposit for both ISAs, you must be a UK resident aged 16 years or over to open a Santander ISA. 

If you have an ISA held elsewhere, Sarah Coles at Hargreaves Lansdown said: “You also need to consider what else you may need the allowance for. If, for example, you wanted to invest significant sums and take advantage of a LISA, you would need to weigh up the best possible use of this year’s ISA allowance.”

If you already hold an ISA that is paying a low rate, you might be considering transferring your funds to an ISA with a better rate. 

How do I transfer my funds to Santander’s fixed-rate ISA? 

The good news is, if you hold an ISA elsewhere but you haven’t used up the £20,000 limit within the current tax year, you can transfer your current ISA to a Santander ISA. 

To do so, you will need to do the following. 

• Ask Santander for a transfer request within 14 days of opening your new ISA. 
• Ensure any money being transferred from another ISA reaches your Santander ISA within 30 days of opening the account. 

Any funds being transferred from the current tax year will need to be transferred to the Santander ISA in full. If you are transferring funds from an ISA you held in previous tax years, you can choose to transfer some or all of the sum. 

Even though Santander does not charge a transfer fee, you should check if the other provider you are transferring from charges a fee. 

If you already hold a Santander cash ISA, you can combine all of your balances into one cash ISA by filling out Santander’s transfer form. 

How do I claim the £50 E-voucher from Santander? 

You are eligible for a £50 E-voucher from Santander if you transfer funds from ISA held with another bank provider to Santander. You must transfer a minimum of £10,000 and hold this amount in your ISA until you receive the voucher. 

Santander will notify you within 30 days of the transfer being completed if you qualify for the voucher. 

If you do qualify, you will be emailed with details of where you can redeem your voucher. The code will be valid for 12 weeks. 

Here is a full list of retailers where you can use the £50 E-voucher, including Adidas, Asos and Currys. 

If you have any issues, you can contact Santander on 0330 9 123 123. 

How do Santander’s ISA rates compare to the rest of the market? 

Santander’s new fixed ISA rates are above the Bank of England’s base rate of 5.25%, but they don’t make our top fixed ISAs best buy table. Here’s how they compare. 

At the time of writing, these are the top one-year fixed rate ISAs: 

• Shawbrook 1 Year Fixed Rate ISA- earn 5.83% AER. Open online with a minimum of £1,000.  
• UBL 1 Year Fixed Rate Cash E‑ISA- earn 5.77% AER. Open online, in branch or via post with a minimum of £2,000.  
• Aldermore 1 Year Fixed Rate Cash ISA- earn 5.71% AER. Open online with a minimum of £1,000.  

Even though Santander’s new rate doesn’t match these ISAs, it might still be a good option if you’re looking for a lower deposit- as you can start saving in a Santander ISA with £500. 

These are the top two-year fixed rate ISAs at the time of writing: 

• Aldermore 2 Year Fixed Rate ISA- earn 5.61% AER. Open online with a minimum of £1,000. 
•  UBL 2 Year Fixed Rate Cash E‑ISA- earn 5.6% AER. Open online, in branch or via post with a minimum of £2,000.  
• Shawbrook 2 Year Fixed Rate Cash ISA- earn 5.58% AER. Open online with a minimum of £1,000.  

Again, even though these ISAs offer a better rate, you need a minimum of £1,000 to open the top-paying two-year fixed ISA offered by Aldermore. 

The biggest benefit of saving in an ISA is it gives your money a tax-free wrapper. But if you’re saving up to £12,570, (the current tax-free threshold on savings), it's worth considering a savings account. 

You can earn more than 6% on a one-year fixed rate saver and more than 7% on a regular saver.