Over 50's - will you take out an ISA now or delay until October

Primrose

I've just read that Banks and building societies may bring in “two-tier” rates from October – when the increase takes effect for the over-50s – for savers adding to cash Isas they have already taken out this tax year.
“Isa managers are very unlikely to offer higher rates on top-ups,” said Kevin Mountford, head of savings at Moneysupermarket.com. With current rules restricting savers to one cash Isa per tax year, “providers will see this as captive business and some will take advantage of the situation"

If this is going to be the latest crafty dodge by providers, is there any point in investing in a Cash ISA now and getting locked in to a poor rate?. Will anybody be delayed until October to put money into their Cash ISA?

Apparently HMRC said it was consulting with the industry on how top-ups will work. One possibility is that savers could put the extra contributions into an Isa with another provider. This could boost competition for top-up cash.

libra10

Decisions! Decisions!

We are currently transferring part of OH's and my accumulated ISA funds to another provider. When that is finalised we will look at current year's allowance. OH did last year's ISA with a Skipton fixed rate bond and they wouldn't allow him to add this year's funds. Last year I did a fixed rate bond with Halifax, which matures in July.

I suppose we'll see what the consensus is and decide then.

Good luck

cloud_dog

Primrose wrote: »

I've just read that Banks and building societies may bring in “two-tier” rates from October – when the increase takes effect for the over-50s – for savers adding to cash Isas they have already taken out this tax year.
“Isa managers are very unlikely to offer higher rates on top-ups,” said Kevin Mountford, head of savings at Moneysupermarket.com. With current rules restricting savers to one cash Isa per tax year, “providers will see this as captive business and some will take advantage of the situation"

If this is going to be the latest crafty dodge by providers, is there any point in investing in a Cash ISA now and getting locked in to a poor rate?. Will anybody be delayed until October to put money into their Cash ISA?

Apparently HMRC said it was consulting with the industry on how top-ups will work. One possibility is that savers could put the extra contributions into an Isa with another provider. This could boost competition for top-up cash.

And why wouldn't you be able to have a second ISA product (for the top-up amount) with the same provider??

I think your post is confusing the increased ISA allowance with whatever products are on offer now against what might be on offer.

As a bottom line statement ISA savers will not be adversely affected by the change. Its no different to putting £1500 now in to a fixed rate deal and then in 6 months trying to put another £1500 in; if the product doesn't allow top-ups, it doesn't allow top-ups.

cloud_dog

libra10

The only problem I find is that you end up having lots of different accounts which you have to keep track of!

dach

If the providers were sharp they could take the £1500 now and hold it in a taxable account, at the ISA rate of interest, until october when they could top up the existing ISA.

MarkyMarkD

The Moneysupermarket story makes no sense. There is another thread on this already, based on the same press release.

But basically, why would providers give a LOWER rate? People who are over 50 and already subscribed the £3,600 before October could switch to a different provider at any point anyway, and top up with the £1,500. So offering a special "crap top-up rate" as Kevin Mountford appears to think will happen, is ludicrous.

Most institutions are keen to get your savings off you. I think it's rather more likely they will do their utmost to get in this extra £1,500 from their existing customers - offering them the same rate as they presently get is the most likely; offering them a premium rate is also possible.

The only element of the story which rings true is that there is a problem for those who have bought fixed rate ISAs - as many have - because most of these do not generally allow top-ups. But for those who have taken them out in April it is unlikely that prevailing rates will be lower in October, so I suspect that many of those providers will re-open the accounts to the over-50s in October to get the benefit of the extra £1,500, almost definitely at the existing fixed rate.

rb10

libra10 wrote: »

The only problem I find is that you end up having lots of different accounts which you have to keep track of!

You can merge ISAs together, so just end up with one or two accounts.

evenasus

I consolidated my several years worth accumulated ISA & Matured Tessa into a fixed rate Nationwide ISA last November.:D My husband did the same.

This year we've opened a Barclays Golden ISA each.
Didn't think going for a fixed rate was a good idea. Good job I didn't or we wouldn't be able to top them up with the extra £1500.00.

libra10

You can merge ISAs together, so just end up with one or two accounts. rb10

It's difficult with government compensation limits if another bank collapses.

Steve_xx

rb10 wrote: »

You can merge ISAs together, so just end up with one or two accounts.

However, with the fact that ISA's have been around for 10 years now, and considering that now the maximum deposit will be £5100 in each tax year, it means that many savers will, if they have left their ISA's untouched for all of this time, be getting close to the £50k FSCS limit if they hold their ISA with just one provider!

No government or tax official, to my knowledge, seems to have noted that this is fast becoming a problem that will need dealing with specifically.

rb10

Steve_xx wrote: »

However, with the fact that ISA's have been around for 10 years now, and considering that now the maximum deposit will be £5100 in each tax year, it means that many savers will, if they have left their ISA's untouched for all of this time, be getting close to the £50k FSCS limit if they hold their ISA with just one provider!

No government or tax official, to my knowledge, seems to have noted that this is fast becoming a problem that will need dealing with specifically.

Ok, so have two accounts, each with a different bank. This is not too hard to keep track of, and gives you a total of £100k limit.