Best Cash ISAs for over 50s

To find the best cash ISA for over 50s, compare the whole market. ISAs are available to anyone aged 16 upwards, not just the over 50s, therefore don’t be restricted by age. Also consider whether you’ll need to access your savings as more restrictive ISAs usually offer higher interest rates.

The following information explains the benefit of these tax free savings accounts, what to look out for and how to choose the best ISAs for you.

What is a cash ISA?

Cash ISAs are like savings accounts. Some ISAs allow full flexibility when it comes to accessing your money whereas others lock your savings in for a specific period. However, the big difference with a cash ISA is that the money you earn is always completely tax free.

The amount you can invest in an Individual Savings Account (ISA) is limited. Each year all UK residents aged 16 and above receive an ISA allowance which is set by the government. This allowance dictates how much you can invest in a tax free ISA that tax year.

Although the amount you can invest in a new cash ISA is limited, transferring cash from old ISAs isn’t. Basically, there are no limits when it comes to transferring old ISAs into better performing new ISAs. However, to ensure you don’t lose your tax free status, you must adhere to the ISA transfer rules.

What are the best ISA rates for over 50s?

ISA interest rates can be fixed or variable depending on the type of ISA you choose. Usually the longer you’re happy to lock your money away, the higher the interest rate will be. However these days, ISAs don’t always offer the best interest rates for over 50s compared to other types of savings accounts.

With the introduction of the personal savings allowance allowing basic rate taxpayers to earn £1,000 interest tax free, ISAs have become less popular. The important point to remember though is that with cash ISAs, all of your interest is always tax free.

Therefore, if you’re a high earner that doesn’t benefit from the personal savings allowance or there is a danger you may exceed the threshold, an ISA could be a worthwhile option.

Savings Champion ISA best buys

What are the different types of ISA?

In total there are five different types of ISA:

  • Cash ISA – a simple tax free savings account.
  • Stocks and Shares ISA – an investment account where your money is invested in funds, bonds and shares. Your return on a stocks and shares ISA therefore depends on the performance of the market.
  • Innovative Finance ISA – A riskier ISA based on peer-to-peer lending to business, property and crowdfunding.
  • Lifetime ISA – designed to help 18 to 39 year olds get on the property ladder or save for retirement. The amount you can invest in a lifetime ISA is capped at £4,000 per year.
  • Junior ISA – tax free savings accounts for children under 18

In addition, each type of ISA has its own range of options to choose from. This in turn will dictate the flexibility of the account and the interest you earn.

What types of cash ISA are there?

The different types of cash ISA typically include:

  • Instant access ISAs – you can make withdrawals at any time
  • Easy Access ISAs – you can make withdrawals but it may take a few days to receive your money
  • Notice ISAs – you must give notice to receive funds
  • Regular saver ISAs – you must make a deposit every month
  • Fixed rate ISAs – your money is locked in for a specified period

Usually the more difficult it is to access your money, the higher the interest rate will be.

What is the ISA allowance for 2020/21?

The ISA allowance for 2020/21 is £20,000. This means you can invest up to £20,000 in a cash ISA, stocks and shares ISA, Innovative Finance ISA or Lifetime ISA this tax year. Any allowance not used by the end of the tax year is lost and cannot be carried over.

best isa rates for over 60s

How many ISAs can you have?

You can have multiple cash ISAs but you can only invest in either one cash ISA per year, or a combination of the different options. For example one cash ISA, one stocks and shares and one innovative ISA. However, the golden rule is you mustn’t exceed that years ISA allowance.

The transfer of ISAs from previous years isn’t included in the annual allowance. Therefore, in addition to your annual ISA allowance, you can make as many older ISA transfers as you want.

What are the ISA transfer rules?

ISA transfer rules dictate that you must be able to transfer ISAs out to either a new better performing ISA or a different type of ISA. However, some ISAs don’t accept transfers in, so you will need to keep this in mind when comparing the market for the best ISA.

If you want to arrange the transfer of a current tax year ISA, you must move the whole amount. Whereas with previous years ISAs, you can transfer some of the money if you don’t want to move it all.

The most important thing to remember when transferring an ISA is never withdraw your money and close the account as you will lose your tax free status. Instead you must follow the ISA transfer process.

  • Compare the market to find the best ISA
  • Open your new account
  • Complete your new bank or building society’s transfer form

They will handle the transfer process from this point which usually takes up to 15 days.

What are the pros and cons of Cash ISAs?

The pros and cons of cash ISAs will help you decide if this is the right type of savings account for you:

Pros

  • Tax free savings
  • Range of options to choose from
  • Fully transferrable so you can swap to a better deal
  • No arrangement fees

Cons  

  • You can only invest £20,000 per year in a new ISA
  • Any unused allowance cannot be carried forward to the following year
  • Interest rates can be lower than other types of savings account
  • You can’t have ISAs in joint names

Is my money safe in a cash ISA?

Lifetime ISAs, junior ISAs and cash ISAs are safe as your money is protected by the Financial Services Compensation Scheme (FSCS). So as long as you don’t exceed the £85,000 threshold per institution, your money is safe. However, protection for other types of ISA differs.

For example, Stocks and Shares ISAs are also covered by the FSCS but only up to £50,000. Innovative finance ISAs on the other hand are classed as investment products and therefore have no FSCS protection.

How can I find the best fixed rate cash ISA for me?

To find the best fixed rate cash ISA or any of the other types of ISA, compare the market. Also consider how much flexibility you need and whether you will want to access your money. If you do then a fixed rate cash ISA may not be the best option.

Instead, an ISA with greater flexibility such as an instant or easy access ISA may be more suitable. 

What should I do now?

When you are ready to compare cash ISAs, using the services of one of the many online comparison specialists such as Savings Champion is a great place to start.

Alternatively, if you require information on other types of saving accounts for the over 50s, for example instant access accountsnotice accounts, regular savings accounts and fixed rate bonds, read our helpful guides.

Savings Champion best buys

Frequently asked questions

Who has the best fixed rate ISA?

To find the best fixed rate ISA, try using one of the many online comparison services such as Savings Champion, Which?, Moneyfacts, MoneySuperMarket or Comparethemarket.com.

Which is the best, an ISA or savings account?

Cash ISAs are tax free savings accounts. Therefore, if your savings may exceed the personal savings allowance, a cash ISA may be a good idea. However, if you are well within the allowance, other types of savings accounts could offer higher rates of interest.

Therefore, it’s important to consider your requirements and compare the options available to you.

What is the best ISA account?

The best ISA account will provide the flexibility you require and an interest rate you are happy with. Therefore, you should decide which type of ISA is best for you, be it an easy access ISA, regular or fixed ISA and compare the market for the best interest rates.

Can you lose money in a cash ISA?

If you keep within the criteria of the Financial Services Compensation Scheme, up to £85,000 per institution is protected in a cash ISA.

What is the best 1 year fixed rate ISA?

To find the best 1 year fixed rate ISA, compare the market. You can do this online through leading banks and building societies and comparison websites such as Savings Champion.

What are the best ISA rates for over 60s?

To find the best ISA rates for over 60s, compare the whole market. Cash ISAs are available to anyone aged 16 years and above with no upper age threshold. Therefore, regardless of whether you are over 60, 70 or 80 years of age, compare all options for the best rates.

Updated 14th May 2020
by Ashley Shepherd
Ashley Shepherd

Ashley is the founder and managing director at Over50choices. With over 30 years’ experience in financial services, he has held senior roles in building societies, banks and insurance companies.

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