Close an Isa for better Savings account rate? Advice sought.

craignattress

Hi,

Just got around to checking out my recent interest rates and i'm wondering whether to close my two isa's in favour of a higher rate savings account.

Is it worth closing two isa's, one with 3.5k @ 2.5%, another with 5.5k @ 1.3% for a savings account rate @ 3.75.

Would the improved interest rate cover tax and once moved would i be able to transfer it all back into an isa?

Thanks for the help, i'm crap with sums. An explanation would be brill.
Cheers

talana

craignattress wrote: »

once moved would i be able to transfer it all back into an isa?

No. Once you move previous years funds out of the ISA wrapper, that's it. Can't move them back in.

Why not find an ISA at 3%+ that accepts transfers in and move all funds to that one? That would be a better option.

3.75% gross on a savings account = 3% net

EalingSaver

Quite. Just find a better ISA, one which accepts transfers in, and move your ISAs. Are you likely to need access to the money in the near term? If not, then you should look at taking out a fixed rate ISA. Interest rates are still likely to go further down, and worse, providers are particulary bad at playing with ISA rates on variable rate accounts. They take advantage of the fact that people rarely check after they've opened, and that many people just don't understand that you can transfer to a better provider.

Halifax are still doing 1 yr fixed at 3.7%, 2 yr @ 3.9%. They do longer terms, but the 4 yr @ 4.1% could well be looking a bit sick in 2 years time.

I believe they allow transfers in to these (they certainly did a couple of months ago, albeit different rates then).

I now have all my ISAs in fixed rate accounts.

Ken68

As luck would have it a lot of my Fixed Rate Isas were due for renewal in late 08, just about managed to get the majority in at 6% plus but dealing with Nationwide is like wading thru treacle. Got the last in at 4%.for two years.
Brought the average down. Time to re-assess when things settle.

Nick_C

Birmingham Midshires (part of HBOS, now Lloyds) are currently offering 4.2% fixed for one year, and accept transfers.

http://www.askbm.co.uk/savings/p/isa/product.asp?id=234

Halifax are offering fixes of
1 Year 3.7%
2 Years 3.9%
3 years 4.0%
4 years 4.1%

See http://www.halifax.co.uk/savings/fixed-rate-isa.asp

Personally, I wouldn't fix at these rates for more than 2 years.

unhealthyman

Definitely not. Once you've abandoned your tax wrapper, you can't get it back. A few % difference in the short term will not make up for the tax you'll pay in the long run.

The only exception to this is if you expect to use the money soon. (i.e. spend it all within the next 5 years or so...) Otherwise, taking full advantage of the tax breaks makes the most sense.

Primrose

kent Reliance are offering a No Passbook ISA with 3.01% interest and they accept transfers in. Have found that over the years they offer a consistently competitive rate. No fancy bonuses but they are very transparent and have appeared in the most reliable performers table. Have also found them efficient to do business with.
I personally wouldn't give up your ISA tax free allowance. Once it's gone, you can't reclaim in and if you can afford to leave your money invested for the long term, I'm sure taxes are bound to go up. If you're likely to become a higher rate taxpayer in the future, your tax free allowance will be even more worth hanging on to.