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Halifax ISA Review 2020 – Is it a Good Investment?

Halifax Bank has one of the widest collection of ISA accounts. Lets look at the features and benefits of their most popular ISA accounts
Kane Pepi
Author: Kane Pepi
Last Updated: March 17, 2020

HALIFAX bank logoAre you currently in the look-out for an investment product that will allow you to grow your money, but at the same time comes with virtually no risk? If so, then you are probably best off sticking with a simple ISA. There really isn’t too much to separate the types of interest that banks and building societies are currently offering on their respective ISAs, and the annual AER will rarely exceed 1%.

Nevertheless, one such provider that currently has a good selection of ISAs is that of Halifax. As such, if you are thinking about investing some money into a Halifax ISA, be sure to read our review to see what’s on offer.

Halifax typically offers better interest rates if you are happy to lock your money away for a certain period of time. Just make sure that you are confident that you won’t need to access your cash on-demand if you do choose a fixed term.

Pros and cons of Halifax ISAs

The Pros

  • Most ISAs are 100% risk-free
  • Offers a variety of ISA types
  • Most accounts can be opened online
  • You can usually get started from just £1
  • Very competitive Junior Cash ISA at 3.00% AER

The Cons

  • Interest rates on Cash ISAs are super-low

Halifax ISAs: What ISAs are offered?

HALIFAX bank logo

Below we have listed all of the ISA accounts that Halifax currently has on offer. On top of the underlying interest rates, be sure to make considerations regarding withdrawals and account minimums.

1. ISA Saver Fixed - 0.55% AER per year

If you are looking for the highest paying Cash ISA available at Halifax, at the time of writing this comes in the form of its ISA Saver Fixed account. In a nutshell, the ISA pays an annual AER of 0.55%. This rate is nothing to write home about, as you can easily earn more interest elsewhere. Nevertheless, the good news is that the 0.55% AER rate is fixed, so you do not need to worry about market conditions. As such, you will always know exactly how much your money is going to be worth.

Moreover, Halifax also gives you the choice of having your interest paid out monthly or annually. In terms of the fundamentals, you will need to lock your money away for two years. This is much longer than the fixed terms currently being offered by other high street banks and building societies. As a result, you should only proceed if you are 100% sure that you won’t need to make a withdrawal before the 2-year term concludes.

If you do need access to your cash before reaching the 2-year term, the only option that you will have will be to close the account. However, Halifax notes that you will lose the equivalent of 180 days interest. It is also important to note that the Halifax ISA Saver Fixed account requires a minimum deposit of at least £500.  Finally, you can open an account via the Halifax website, in branch, on the telephone, or via the mobile app.

Key Points:

✔️ 0.55% % AER interest per year

✔️ Required to deposit at least £500 to get started

✔️ Interest is fixed, so you’ll always know how much interest you’ll make

✔️ Required to lock-up money for 2-years

✔️ Open an account online, in branch, on the telephone, or via the app.

✔️ Early account closure results in the loss of 180 days worth of interest

2. ISA Saver Variable - 0.20% AER per year

At the other end of the Halifax ISA spectrum, the ISA Saver Variable account is suited to those of you that want the freedom of accessing your cash at any time. Unlike the Fixed Cash ISA – which requires a lock-up of 2-years, the Saver Variable offered by Halifax allows you to make withdrawals whenever you see fit. As such, the account operates in a similar nature to a standard savings account.

While it is notable that you will be able to access your cash on-demand, it is crucial to also note that the ISA pays a measly 0.20% AER per year. As such, it’s barely worth considering as there are heaps of alternatives in the market that pay more, while still giving you the freedoms of instant withdrawals and risk-free gains.

Nevertheless, Halifax does at the very least allow you to open the ISA with just £1. Moreover, if you do make a withdrawal, the ISA account allows you to re-gain the allowance if you replace the withdrawal further down the line. Finally, the interest is paid once a year, 12 months from the date you open the account.

Key Points:

✔️ Pays a measly 0.20% AER per year

✔️ The interest rate is variable

✔️ Interest paid annually

✔️ Get started with just £1

✔️ Unlimited withdrawals

✔️ Annual allowance not affected if you replace the withdrawal in the same tax year

3. Help to Buy: ISA - 2.25% AER per year

While the first two Halifax ISAs we have reviewed thus far have fallen short in the interest department, the bank is much more competitive with its Help to Buy ISA. As such, if you are in the process of buying your first home, or you are looking to start saving for that all-important deposit, then you will benefit from 2.25% AER per year in interest.

Not only will you receive interest from Halifax, but you’ll also benefit from the 25% top-up rate that the UK government provides on Help to Buy ISAs. This means that for every £200 you deposit, the government will add £50, which is great. Don’t forget, this is only for the first £12,000, meaning that the maximum government top-up amount stands at £3,000.

Nevertheless, in terms of the fundamentals, you will need to deposit between £1 and £1,000 within 21 days of opening the account. Moreover, once you have made your initial deposit of up to £1,000, you will then be capped at £200 per month. While the Halifax Help to Buy ISA does permit withdrawals, you will lose your government top-up funds, so avoid this at all costs. Finally, while you are able to open an account via the Halifax website, the bank requires you to close the account in branch or by post.

Key Points:

✔️ 2.25% AER interest per year

✔️ Interest rate is variable, so the rate can go up or down at any time

✔️ Withdrawals are permitted, but you’ll lose your government top-up funds

✔️ Open an account online

✔️ First deposit between £1 and £1,000

✔️ Monthly deposits capped at £200

4. Junior Cash ISA - 3.00% AER per year

If you are looking to start putting some money away for your child’s future, then we would highly recommend the Junior Cash ISA currently being offered by Halifax. In fact, it’s one of the most competitive ISAs of its type. First and foremost, the Junior Cash ISA comes with an AER of 3.00%, with the interest being paid out annually. However, it is also important to note that the 3.00% rate is variable, meaning that it can change at any time.

Moreover, we also like the fact that the Halifax Junior Cash ISA allows you to get started with just £1. In terms of the fundamentals, this particular ISA is available to all UK residents, as long as your child is below the age of 18. Most importantly, you will not be able to withdraw the money from the account until your child turns 18. As such, you need to be absolutely sure that the funds you are putting away for your child will not be needed.

When your child does turn 18, the account type will revert to a standard adult Cash ISA until a withdrawal is requested. The Halifax Junior Cash ISA is also fully protected under the FSCS, meaning that as long as your balance does not exceed £85,000, your funds are 100% risk-free. Finally, Halifax gives you the option of opening the ISA online, although when it comes to the redemption date, you’ll likely need to do this in-branch with your child.

Key Points:

✔️ Pays 3.00% AER interest per year

✔️ Available to all UK residents that have a child aged below 18 years

✔️ Get started with just £1

✔️ The money cannot be accessed until the child turns 18

✔️ Protected under the FSCS

✔️ Open an account online

5. Stocks and Shares ISA - Interest % depends on investments

If you have read through the four Halifax Cash ISAs that we have discussed thus far, you’re probably somewhat underwhelmed by the amount of interest on offer. While the Junior Cash ISA and Help to Buy ISA does pay 3.00% and 2.25% respectively, the standard Cash ISAs on offer come with super-low rates. With that being said, the final option available to you is to consider a Stocks and Shares ISA.

For those unaware, this is where you keep your stocks and shares at Halifax and subsequently avoid paying any tax on your capital gains up to the £20,000 annual ISA allowance. As such, you won’t receive any interest from Halifax from the other ISAs we have reviewed. Instead, your gains (or losses) are based on the underlying shares that you have within your portfolio.

On the one hand, you do stand the chance of making much more than the other ISAs on offer. However, this isn’t guaranteed, as the value of your shares could just as easily go down. This is why you are best advised to hold on to your shares for at least five years, as this will allow you to ride out the ups and downs.

Key Points:

✔️ Higher risk – investments can go up and down

✔️ Inject up to £20,000 per tax year

✔️ Choose from an initial lump sum of £2,000, or monthly payments of £100+

✔️ Purchase your shares directly from the Halifax online platform

Is a Halifax ISA safe?

One of the overarching benefits of invested money into a UK-based ISA is that the process is virtually risk-free. While in return you will receive ultra-low interest rates, ISAs are ideally suited to those of you that have no appetite for risk. This is because Halifax is part of the UK’s Financial Services Compensation Scheme (FSCS). For those unaware, this will protect your money up to the first £85,000. If Halifax were to go under, the FSCS is covered by the UK government.

FSCS logo on the Haligax bank website

However, just remember that the protection in place is for all of your money at Halifax, not per account type. Therefore, if you have funds with Halifax within a different account (for example a standard current account), then only the first £85,000 will be protected. As great as the protections of the FSCS are, you won’t benefit from a risk-free investment if you go with the Halifax Stocks and Shares ISA. As we mentioned earlier in our review, there is no guarantee that you will actually make any money, as your returns are based on how your shares perform on the stock exchange.

How much can I invest into my Halifax ISA per year?

First and foremost, the account limitations imposed by Halifax will depend on the specific tax year. In the year of 2019/20, the UK government allows you to invest up to £20,000 into your ISA account. The great thing about this is that you have the option of distributing your £20,000 across one or more ISA accounts.

The ISA investment page of Halifax bank

For example, if you are saving for a house you could take full advantage of the £200 monthly deposit, and leave the rest of your annual allowance for a standard Cash ISA. On the other hand, just remember that you need to check the terms and conditions regarding withdrawals. While some Halifax ISAs allow you to replace previously made withdrawals without it impacting your annual allowance, others don’t.

FAQs

Do I need to have a bank account with Halifax to open an ISA?

This depends on the specific ISA you are looking to open. For example, if you are looking to open the Halifax ISA Saver Variable - which gives you 24/7 access to your cash, then you'll need to open a fully-fledged account.

Is a Halifax Help to Buy ISA safe?

Yes, it is 100% safe. The Help to Buy ISA is fully protected by the FSCS, meaning that your savings will be protected by up to £85,000 in the event that Halifax Bank collapsed.

How much can I put into a Halifax ISA?

As per the 2019/20 limits, you can invest up to £20,000 per year. Don't forget, this is reviewed annually by the UK government.

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Kane Pepi

Kane holds academic qualifications in the finance and financial investigation fields. With a passion for all-things finance, he currently writes for a number of online publications.