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Closing A Fixed ISA
johnsmithy
Posts: 104 Forumite
Hi,
Sorry for being thick, but can someone explain to me how a Fixed ISA works, in terms of closing it?
Currently, I have an ISA with the post office, but have fallen on hard times, so may need to close it.
For example, if I invested £5000 into the ISA and I closed it early on a 3 year fixed term, how much would I lose if I lost 270 days worth of interest? I am just interested in how it works.
If someone could provide a financial example, it would be appreciated as the examples online of the penalties faced are at best, rather vague.
Thanks,
johnsmithy
Sorry for being thick, but can someone explain to me how a Fixed ISA works, in terms of closing it?
Currently, I have an ISA with the post office, but have fallen on hard times, so may need to close it.
For example, if I invested £5000 into the ISA and I closed it early on a 3 year fixed term, how much would I lose if I lost 270 days worth of interest? I am just interested in how it works.
If someone could provide a financial example, it would be appreciated as the examples online of the penalties faced are at best, rather vague.
Thanks,
johnsmithy
0
Comments
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Do you not think that it's worth saying what interest rate it is?johnsmithy wrote: »....
For example, if I invested £5000 into the ISA and I closed it early on a 3 year fixed term, how much would I lose if I lost 270 days worth of interest? I am just interested in how it works. ...
You will not make a big error if you multiply the rate by 270/365, then by £5000:
£5000*R*270/3650 -
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It's not difficult to work out, and grumbler has given you the basics.
£5000 x 1.91% = £95.50 interest at the end of the first year.
One year = 365 days. Penalty for early closure is 270 days interest of current balance.
So, if still in first year (current balance 5000) the penalty is 270/365 x 95.50. Which equals £70 penalty.
If you're already in year 2 or year 3 then the balance has increased with interest from year 1 and/or 2 already added, so the penalty figure will be slightly higher.
Edited to add: So if you close the account within the first year you'll get back less than you put in. Close after the first year and you'll still get a modest profit. So if you are still in the first 12 months it would be worth hanging in there until at least the first anniversary if you can.0 -
Only if closed within the first 270 days - once it reaches 270 days then the interest earned outweighs the closure penalty (just because interest isn't paid until year end doesn't mean it isn't earned pro rata before then).So if you close the account within the first year you'll get back less than you put in.0 -
It depend son the terms of the individual account. Why not call up the provider and ask them?0
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