Savers who rushed to stash money away before the end of the financial year in 2023 into short-term Isa arrangements will now see their accounts mature in the run-up to the end of the current financial year.
But they are warned that interest on their tax-free savings could fall to just 0.1 per cent in a worst-case scenario.
With £20,000, in the current best one-year solution, savers could earn £1,027 in interest over a year, compared to just £20 if they allow their Isa to be rolled over at a horrendous rate – a staggering difference of £1,007.
>> See This is Money’s independent best buy savings tables for the top one-year fixed rate cash Isas
Locked in: Savers who locked away their savings within a year this time last year could get a 4% rate. But if they are not careful, this figure could drop to just 0.1%.
At the end of February 2023, the main one-year fixed Isa available to new customers came from Barclays at 4 per cent, according to rate examiners Moneyfacts Compare.
This was followed by UBL UK, which offered 3.91 per cent, and Castle Trust Bank, which offered 3.9 per cent.
Savers should take action if they don’t want to end up with a low rate by instructing their Isa provider on what to do with the cash at the end of the term.
Contact your supplier – DO NOT do anything…
If you don’t give instructions to Castle Trust Bank about what to do with your money, the one-year fixed Isa becomes something called a maturity holding account.
This has a variable interest rate of over 0.1 percent.
If a saver invested £20,000 in Castle Trust Bank’s one-year Isa around this time last year, they would have earned around £794 in interest at the end of the term.
Savings rates have been falling gently in recent months, but top deals are still better than a year ago.
The best one-year solution now comes from OakNorth, which offers 5.02 percent. This would generate £1,027 interest on £20,000. Use our savings interest calculator to work out what different rates mean for your money.
But if the money is left to languish in Castle Trust Bank’s maturity account, after a year the savers would have made a paltry £20 out of £20,000.
Castle Trust Bank will contact customers approximately fifteen days before an account expires.
Savers can provide maturity instructions online through their self-service portal.
Castle Trust’s one-year Isa rate is now 5 per cent; Savers can also choose to transfer money to this account.
This would mean £1,023 in interest and is one of the best deals on offer.
At the end of the Barclays 4 per cent one-year fixed Isa term, the account converts to an easy-access cash Isa with a variable rate.
That account today pays 1.65 per cent on balances up to £10,000, a drop of 2.35 percentage points from the original.
For balances over £10,000, the rate is even worse: 1.2 per cent, a drop of 2.8 percentage points.
If you had saved £20,000 in the Barclays Fixed Rate Isa, you would have earned £815 in interest at the end of the term.
By leaving money in a year’s account when it matures, you could lose £740 in interest by not moving your money into the best one-year fixed Isa.
Barclays also offers a one-year fixed rate Isa of 4.65 per cent, and savers can choose to reinvest into it, but must contact the bank to do so, rather than allowing it to be reinvested.
Like Castle Trust Bank, you must also provide UBL UK with instructions on what you want to do with your Isa money.
If you want to withdraw and reinvest your money in another Best Buy account, you must write to the bank telling them that you want to withdraw your money at least one business day before the due date.
If you don’t do this, UBL will automatically transfer your Cash Isa into a Cash Isa that is identical or reasonably similar to your overdue account.
The interest rate will be any interest rate offered by UBL UK at that time. The UBL one-year fixed Isa rate is now 4.56 per cent.
With the best one-year fixed Isa rate now at 5.02 per cent and the best easy-access Isa at 5.08 per cent, you’d be missing out on a better interest rate if you left your money in the one-year fixed Isa UBL.
UBL UK will write to you at least fourteen days before your Cash Isa expires to ask what you would like to do with your Cash Isa when it expires.
Savings rates peaked above 6 percent, but have fallen sharply since fall
What are your options when your fixed rate Isa expires?
If you want to keep your money again for a year, the best one-year fixed rate is from OakNorth and it pays 5.02 percent. Fundamentally, it allows transfers from other providers.
Fixed rate accounts have been falling across the board, but one-year fixed Isas have risen to more than 5 per cent in recent weeks from 4.7 per cent.
The best two-year fixed Isa pays less than the top one-year fixed Isa. Savers can get a two-year fix of 4.65 per cent from Close Brothers Savings.
For those who need easy access to their cash, easy access Isas also pay more than 5 per cent.
Best of the rest is Zopa’s Easy Access Isa, which pays 5.06 per cent. It is a variable rate so it could go down.
The message here is that when saving your money for a fixed period, it is vital that you are fully aware of what will happen to your savings rate when the term ends.
Rachel Springall, finance expert at Moneyfacts Compare, said: “It is vital that savers are aware of any conditions and ensure they give instructions on how they want to access their cash at maturity if it is a fixed account.”
‘Some accounts may automatically transfer money to an instant access alternative which may result in poor returns.
‘Those with a fixed rate Isa could set a daily reminder to review their account about a month before the end of their fixed term, to give them some time to explore new options.
“Savers would be wise to review older existing funds and switch their Isa to a better deal to maximize the interest they earn, and not cash out to maintain their tax-free status.”
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