ISA Query

harold123

i finally got my second email from Icesave today so money is on its way hopefully, i had an ISA with them so will need to transfer. I have roughly £17000.

Is it better to put it into a fixed rate Isa as i know i will not need it for at least a year or a variable one?

The Variable isa's are obviously better at the moment but they are sure to come down? aren't they?

Any help or adivce would be much appreciated.

Thanks

masonic

harold123 wrote: »

The Variable isa's are obviously better at the moment but they are sure to come down? aren't they?

They're almost certain to come down. Nobody knows when, by how much and for how long. Fixed rates are currently very poor, so the gamble you make by taking one up is that variable rate accounts will be much worse.

Newly_retired

I have just rung Scottish Widows and their ISA rate is going to come down to 3.1% next Monday, including those accounts recently set up at 6%.
I am searching for a decent rate for Icesave ISA - money not yet received.
SW said as soon as the money is in my acccount I can send a cheque, and the FCSC certificate can follow when I get it.
Now I'm looking for a better rate, if there is one. A fixed rate is looking safer, for who knows what is going to happen to savings rates now?

Thomas_Crown

Newly_retired wrote: »

I have just rung Scottish Widows and their ISA rate is going to come down to 3.1% next Monday, including those accounts recently set up at 6%.

Scottish Widows were paying 4.5% + 1.5% bonus = 6%

Will they be paying 3.1% + 1.5% = 4.6%? Or is the bonus being scrapped?

When I phoned them on Monday last week I was told that their rates had already dropped.

ragingbass

Hmm, I'm very confused now!! I was just considering moving the ISA from HSBC (4.25%) to Scottish Widows (currently 6%), but sounds like it could end up being a waste of time.

Don't suppose anyone knows if there is any pattern to when the banks release new ISA products? Is it a fairly random promotion thing, or do people think that there's a decent chance another provider could come up with a top rate in say January? I'm guessing it's a bit like predicting when a high street retailer will have a top promotion, but thought I'd ask on the off chance that there is some pattern.

masonic

A lot of competitive ISAs tend to get released in the lead up to 5th April as the banks fight for people who have left it until the last minute to use their allowance (and those who are quick off the mark the following tax year).

ragingbass

Thanks masonic! I guessed April was probably the major peak time of year, but wondered if there was any other significant milestones. Like say, at the end or beginning of each quarter say?

My dilema right now is that I could move the ISA to Scottish Widows and earn a few extra quid fairly easily, but then if another great offer comes in January say, then do I move it again?!?! I guess, like everything, it's a gamble.

masonic

Well, when you are thinking about transferring an ISA, the overriding factor is always the difference in rates. You will normally lose interest during the transfer (ISA cheque is posted to new provider and then typically goes through a clearing cycle, during which time you don't get paid interest). If you assume you'll lose a weeks worth of interest, then the following will tend to apply:
For a 0.1% difference in interest, you'd need a full year to make back the interest lost in transferring.
For 0.2%, it would take about 6 months.
For 1%, you'd start gaining after just a month.

In your case, it looks as though the rate at Scottish Widows is likely to end up at 4.6% by the time you shift your money, so at that difference you'd really want to hold it there for 3-4 months so as not to lose out over leaving it where it is. But that new rate will have priced in the recent rate cuts and it's unlikely anything spectacular will come along in the current climate.

SGE1

Newly_retired wrote: »

I have just rung Scottish Widows and their ISA rate is going to come down to 3.1% next Monday, including those accounts recently set up at 6%.
I am searching for a decent rate for Icesave ISA - money not yet received.
SW said as soon as the money is in my acccount I can send a cheque, and the FCSC certificate can follow when I get it.
Now I'm looking for a better rate, if there is one. A fixed rate is looking safer, for who knows what is going to happen to savings rates now?

A drop of almost 3%?? Are you sure? Sorry, but that doesn't seem right. Many are passing on the 1.5% drop in full, so it's conceivable that they might drop it to 4.5% inc bonus, but to 3.1%, that sounds a bit odd.

ragingbass

Thanks again masonic, it's certainly food for thought. I haven't transferred an ISA before and so wasn't really too sure how the whole transfer would work in the interim period. But that makes it more clear to me now and the fact that you're missing out on interest in the days/weeks to transfer is definitely a factor to consider.

I'm not too sure in terms of percentages, but another factor I've been pondering is that HSBC's ISA pays out interest monthly, whereas the Scottish Widows ISA pays out yearly. As a bit of a guesstimate, that's got to be worth another say 0.1% or something? And, not trying to plug it here, but HSBC's doesn't have a short term bonus associated with it, so I guess the rate isn't too bad, even if it does stick in the throat a bit that it dropped a whole 2%.

In terms of stick or twist, I think I'm going to stick this time around given the question marks about the potential rate drop from Scottish Widows and the guarenteed loss of interest in the interim transfer period. Seems a more pragmatic approach to review it all again in the build up to the April scramble.

Newly_retired

SGE1 - I was quoting the guy from Scottish Widows who answered the phone, and 3.1% is what he said will be the new rate on the variable rate ISA from next Monday, regardless of what it was when it was started. Now I'm not sure about the bonuses - presumably they will still apply. Depends on your original T & C.
Sorry to be the bearer of bad news!