Sainsbury’s has increased the interest rate on its one-year fixed ISA to 5.7 percent, earning an “excellent” Moneyfacts rating.

While personal savings allowances remain frozen and interest rates increase, ISAs are becoming increasingly popular amongst Britons as an effective tax wrapper.

Commenting on the deal, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “Sainsbury’s Bank has increased the rates on its Fixed Rate Cash ISAs this week, including its one-year deal which takes a prominent position in the market.

“The deal now pays a rate of 5.7 percent on anniversary and may appeal to savers who want to invest over the next year and use their ISA allowance.”

Ms Eastell added: “This deal pays an attractive rate when compared to similar products. Overall, this deal earns an Excellent Moneyfacts product rating.”

Savers can open the one-year bond online with a minimum deposit of £5,000. Interest is calculated daily and paid on the anniversary of account opening.

UK residents aged 18 or over can apply and the opening deposit must be invested within 30 days. However, the product is designed to hold people’s money for the full term and only release the funds on the maturity date.

Those who need access before maturity will need to withdraw the whole balance and close the account. A charge equivalent to 270 days’ interest will then be applied.

But while Sainsbury’s may be offering a much more attractive deal, it isn’t quite taking the top spot yet. The highest rate available at present is 5.85 percent and that’s offered by Virgin Money.

Savers can open Virgin Money’s One Year Fixed Rate Cash ISA Exclusive (Issue 6) online or in-store, and they must be UK residents aged 16 or over.

People must also have a current account with Virgin Money, which was opened on or after December 4, 2019. Savers also qualify if they originally opened their current account with Clydesdale Bank, Yorkshire Bank, or B such as a Signature Current Account.

There is no minimum deposit required and interest is calculated daily and applied at maturity, which falls on September 30, 2024. Withdrawals are permitted but money cannot be put back in. However, any withdrawals made within the fixed rate period are subject to a charge equivalent to 60 days’ loss of interest on the amount withdrawn.

Shawbrook Bank’s One Year Fixed Rate Cash ISA Bond (Issue 81) places just behind with an AER of 5.83 percent.

The account can be opened with a minimum deposit of £1,000 and interest is paid on the anniversary. Savers must be aged 18 and over and earlier access will be subject to a 90-day loss of interest.

Fixed-rate ISA balances rose from £76.5billion to £138.8billion over the 12 months, an 81.5 percent increase, research from Paragon shows.

Derek Sprawling, director of savings at Paragon Bank, said: “The shift in the savings market over the past 12 months has been unprecedented, we have never experienced the amount of switching to fixed-rate variants and new account openings before, particularly in the ISA segment of the market.

“To record a 98 percent increase in fixed-rate balances overall, and a more than doubling of the amount held in non-ISA fixed-rate variants will have changed savings habits for years to come.”