Transferring Fixed ISA and paying penalty.

SallySunshine · 15 November 2017 at 6:54PM

This is purely a theoretical question but can't quite work out answer.

Coventry 3 yr Fixed ISA 1.4% opened June 2017 with Combined/Transferred Funds
Think penalty for early transfer etc is 180days and since this is less than a year I'm certain there would be less to to take out than went in.

was thinking of transferring internally to

Coventry 3yr Poppy ISA at 2%

Tried to help work this out but brain isn't working!

Neil_Jones · 15 November 2017 at 7:17PM

Let's say your rate is 1.4%, that's £14 for every £1000.
For simplicity, say you have £1000 in there.

Transfer the £1k out early, your penalty would be 180 days interest which is near enough six months so the penalty would be about £7 give or take.

SallySunshine · 15 November 2017 at 8:16PM

Forgot to mention there is about 58K so I make that a penalty of £406.
is that worth transferring £57594 at 2% for 3yrs.

Neil_Jones · 15 November 2017 at 8:32PM

£57594 at 2% over three years will ultimately mature to £61,119 but remember that your penalty is 180 days interest - if a better rate comes along, yes you can cash it in/transfer it but the interest penalty will be higher (about £575 in year one and £587 in year two).

Whether you think its worth sacrificing c.£400 now for a higher rate is up to you and whether you think the rates are going to increase further and if so by how much - in six months time 3yrs at 2% might look crap in the grand scale of things or it might look like the bee's knees.

SallySunshine · 15 November 2017 at 8:46PM

Thanks Neil, i think i'd managed to work out that over the 3 yr period at 2% the difference would be about £649.
i think if they do decide to transfer it even with the penalty it would stay there for the duration as they have other ISA's.
The person in question had panicked when their ISA matured and so transferred it to the Coventry.
the other alternative was to add it to their Coventry easy access one but that rate went down, although it is now going back to 1.3% from 1.15%.
Once upon a time you opened an ISA early April when the rates seemed to be at there highest, but now it's anyones guess.

SallySunshine · 16 November 2017 at 8:45PM

Update on dilemma,
Coventry Poppy ISA is closing tonight, staff very helpful and verified that there would be a penalty of £400 but there would also be nearly 6 months interest added so it would actually make it about £380 loss.
On-line glitch apparently so not able to apply for opening and transfer but forms being posted so a few days grace to make up their minds what to do.

I assume the Coventry apply any interest first then deduct early withdrawal penalty?

Transferring Fixed ISA and paying penalty.

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