Transferring ISA's - and interest payment
I have a cash ISA for the year 2013-2014 [i.e. last year] with 'Bank A'
At the end of the year [May 2014] the interest rates fall to 0.0000001% or something stupid.
Obviously the thing to do is to transfer it into a new ISA, in 'Bank B' - fairly easy to do once you've located one that allows transfers in.
But what of the interest owed to me from the old ISA? The ISA has reached the end of it's 1 year introductory term, however according to 'Bank A's website, interest is paid annually on the [say] 1st September each year.
If I close/transfer the ISA from A to B before September, will I loose all the cash owed to me as interest since last September, or is it calculated 'pro rata' so to speak??
Many thanks! I'm really not a banker/money person, just trying to stop my savings sinking away. I understand that in real terms RPI is say 3%, so I need to do something else my money will gradually shrink away....
At the end of the year [May 2014] the interest rates fall to 0.0000001% or something stupid.
Obviously the thing to do is to transfer it into a new ISA, in 'Bank B' - fairly easy to do once you've located one that allows transfers in.
But what of the interest owed to me from the old ISA? The ISA has reached the end of it's 1 year introductory term, however according to 'Bank A's website, interest is paid annually on the [say] 1st September each year.
If I close/transfer the ISA from A to B before September, will I loose all the cash owed to me as interest since last September, or is it calculated 'pro rata' so to speak??
Many thanks! I'm really not a banker/money person, just trying to stop my savings sinking away. I understand that in real terms RPI is say 3%, so I need to do something else my money will gradually shrink away....
0
Comments
You should also check the T&C for exit restrictions. On some accounts you might need to give X days notice of termination or lose X days interest. I'm guessing though that yours is a 1-year fixed deal so exit on the anniversary might well be unrestricted.
The "stupid" interest rate is probably a mechanism to keep the money within the ISA system at the end of the year as you would not be able to reinvest it in another ISA if they paid you out in cash (*). But I'm a little surprised that your provider doesn't offer a simple transfer to another ISA account within the same organisation on maturity. Have you checked this?
(*) ETA - well you could but it would count as another year's ISA allowance.
From 1st September 2013 there will be £1006.27 in your ISA, and that will keep earning interest at 2% until the end of the introductory rate, at which time the rate will drop to whatever, and then on 1st September 2014, the interest accrued from 1st September 2013 to the 31st August 2014 will be added to the account.
It doesn't mean, like you thought, that you can't close the account because then you wouldn't get the interest.
What you should look for is Cash ISAs that accept transfers in and narrow it down to results found in the past week, because the Cash ISA market is continually changing, and deals come and go daily. Also you need to search broadly rather than just use one or two comparison sites. Some of the best ISAs aren't listed on comparison sites.
Think about whether you need access to the ISA; if not, a 12 month fixed rate account might suit, and if you'll want to withdraw funds, watch out for restricted access ones, that may only allow you to make a withdrawl 4 times a year. You already know about accounts that pay a bonus for 1 year only.
The transfer in process was overhauled in January 2011, so now the new provider you transfer into should organise the transfer which should be completed within 15 working days. You will need to fill in a form with the account number and details of your existing ISA.
As you opened your ISA in the previous tax year you can split it and transfer in to different providers. However not all providers allow partial transfers. You could also switch the Cash ISA to a Stocks and Shares ISA (but not the other way round).
In addition to the transfer of your existing ISA you could also open up a new Cash ISA, but note that you can only pay into 1 Cash ISA account in this tax year.
So you could transfer your existing Cash ISA into a new ISA account (or accounts), but you can only pay new money into one of the transferred accounts, and you couldn't then open a brand new ISA and pay money into that account.
Here's a list of transfer in Cash ISAa from one link:http://www.lovemoney.com/news/savings-investments-pensions/isas/11609/16-top-cash-isas-for-transfers
It's simple when you know how, but I had to send a lot of messages to them to make sure I didn't cost my Mum her interest. Banks don't miss a trick to make money and charge you fees.
Another thing is if you are transferring how do you know what to put on the form if they don't tell you how much interest you have earned and even though you know the annual interest rate and get the calculator out it will end up being wrong.
If you find a better isa, you have to ask the new isa provider to collect and transfer the isa from the previous provider.
They should give you a warning about it if you choose to close your account rather than transfer - I had to tick a box. Not an issue for us as it's not something my Mum tops up, so I just took out a new ISA with the Nationwide.
No, I'm not in any way planning to transfer it into a current account, and have no wish to withdraw the money so I'll look for whoever offered the best rate for the next year or so. A very quick search shows Halifax as one of the better ones, although even though your locked in for 18 months they still have poor intrest rates compared to when I first opened an ISA 5 years ago. Hey ho....Not much I can do about that.
Bit wary about stocks and shares ISAs. Opened one last year, never got round to putting any money in, but did pick some 'sensible' shares. A year later, some went up and a small few went down, net result was rather average, not sure it's its the best option unless you actively follow the shares to make sure you don't have one that's totally gone off the rails. And i'm too lazy to keep on top of that!
http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp?Travel=NIx
I'm inclined to think that higher rates will return, if only for a short period and if so, then that would be the time to invest for a longer term. Of course, I could be completely wrong!
When you're filling in the transfer form there should be a box to tick if you want to transfer the whole amount. Then all of your initial investment plus all the accrued interest up to the date of transfer will be moved to the new ISA.