A 1 year fixed ISA provides a guaranteed rate of return for one year.
You cannot withdraw the money before the end of the year and if you do, most banks will apply an interest penalty. This is usually in the range of 60 to 90 days worth of interest so can reduce the return on your money considerably.
In short, only go for a 1 year bond ISA if you are certain you will not need the money for at least a year.
Before you compare 1 year fixed rate ISAs you need to consider whether you want to transfer in money you’ve saved using previous years’ ISA allowances. If so you need to restrict your search to the best 1 year cash ISA providers that will allow incoming transfers.
It’s then simply a case of finding the 1 year fixed ISA that will offer the best return.
The best paying instant access cash ISAs often pay a rate of interest that’s equal to the returns available on 1 year fixed term ISAs. However, they do offer the reassurance of a guaranteed return on your money, something that’s not available with one of their variable rate counterparts.
You need to remember that event the best 1 year fixed cash ISA rates drop substantially after the first year. Therefore, be prepared to either transfer the funds into a new 1 year ISA or transition to a longer term fixed term ISA after this time.
It’s also worth bearing in mind that higher returns are usually available from longer fixed term ISAs.
This is counteracted by the very low minimum deposit required to open the account - some banks will accept as little as £ 1 as an initial deposit so they’re more accessible if you don’t have a significant amount in savings.
If you are looking for convenience in operating your account, you need to think about whether you want online access and if so look for ISA providers that offer suitable accounts. Some banks will restrict transactions to branch and you might find that too limiting.
Whereas most ISA products from a UK bank are guaranteed by the FCFS up to £85,000 per individual per financial institution, not all 1 year fixed term ISAs will fall under this protection. Get clarification to be certain your ISA will be fully protected. After all, if you are looking got the best 1 year ISA the security of your deposit is paramount.