Question about fixed-rate ISAs

mr_sharma

Just got off the phone with some rude woman from Northern Rock who wasn't helpful at all so figured I'd ask a question where I'd get a decent answer!

I have £4000.00 to invest from my defunct Icesave account and was looking at Northern Rock's fixed rate ISA (4%). My question is if I put the £4000.00 I have into this ISA for the current tax year am I entitled to add another £3,600 from April onwards? Or would I need a variable ISA to do that?

Lokolo

No thats fine. You can put it in now and open another ISA in April.

Rikki

Yes, you just need to look at the new ISA's available in April 2009.

mr_sharma

But because it's a fixed-rate ISA, presumably I would lose out if I transferred in April?
I guess what I'm asking is that if you have a fixed-rate ISA and you don't decide to move your money, what happens to the new £3,600 allowance from the new tax year. Are you not allowed to utilize it on a fixed-rate plan?

Lokolo

Yes you don't have to transfer in April. You can have 2 on the go.

For example I have an Egg ISA from 2007/2008 and this year I have a Barclays ISA from 2008/2009.

You get the £3600 allowance whatever.

You can put your money into the fixed rate ISA as you are transferring. Then you can open up a new ISA, as you can any year, and put £3,600 in that.

Rikki

If your fixed rate ends in April 2009 you will be given a new variable rate for that ISA.

You can transfer this money, plus the 2009-2010 £3600 allowance into a new ISA.

You cannot add April 2009's allowance to your existing fixed rate deal. It will have to be a new ISA.

mr_sharma

Ah, ok, interesting. I always read it that you could only have one cash isa but I missed the bit that says per tax year I'm guessing. I'm a bit gutted that I missed out on Cheshire BS's 4.5% fixed rate. I delayed from Xmas to sort it out this week and it's gone down to 3.6%!!!

Thanks for your help.

Baldur

The fixed rate period of the NR FRISA ends on 15/12/09, after which it reverts to a variable rate ISA - withdrawals prior to maturity are charged at the equivalent of 60 days loss of interest.

You can basically just open a new Cash ISA after 6th April 2009 (for the 2009/10 tax year) and then look for transfer options for the NR FRISA funds on maturity in December 2009.

mr_sharma

I suppose where the confusion came in is when people say they've built up a number of tax years with their ISA and so they end up keeping a single account and just keep transferring it.

Is it wise to get a fixed-rate ISA now (with my £4,000) and then, as you say, look for a new variable rate from April 2009 onwards.

I'm guessing the way things are going, 4% is the best it's going to be for sometime.....

The_Pedant

Please forgive for jumping in, but I had only really thought about ISA transfers when opening a new ISA for the year. I.e. transfer old, underperforming ISA, to new whizzo ISA with good rate in April, and top it up with the year's allowance.

Am I able to transfer an under performing ISA at 'any time', as well as opening a new ISA.

e.g. Open the new ISA in april with a good rate, but due to restrictions, does not allow transfers, and pay in part/all of that year's allowance. Then, at a later point in the year, transfer an old underperforming ISA to a newer, more appealing ISA?

I was just wondering as I'm just a little fuzzy about the 'you can only invest in one ISA in the financial year' line (off my head from the ISA rules), along with the previous responses here, so I'm wondering whether I can transfer at any time, and providing I don't put additional money in, and providing the terms allow me, I can transfer whenever?

Many thanks.

Baldur

I suppose where the confusion came in is when people say they've built up a number of tax years with their ISA and so they end up keeping a single account and just keep transferring it.

Is it wise to get a fixed-rate ISA now (with my £4,000) and then, as you say, look for a new variable rate from April 2009 onwards.

I'm guessing the way things are going, 4% is the best it's going to be for sometime.....

Your choice - personally my 10 years+ worth of Cash ISA (including former TESSA) funds are in several fixed rate accounts, ranging from one year at 6.5% to four years at 6.2%.