First Direct ISA advice please!

Parisian

I opened a First Direct ISA with a fixed rate of 3.15% until the end of May 2010. After this date it will convert to a v. low rate (not sure of exact number, but will def need to transfer!)

I usually fill my ISA on the first day of the tax year, but am unsure of what to do this year. Shall I:

1. Arrange to transfer £5100 on April 6th into the First Direct ISA & look to transfer the whole amount (£20k plus) to a transfer-in ISA after the end of May. (Will I have any problems with finding an ISA which accepts 2010/11 and past years as a transfer in?).

2. Open a new ISA (e.g. the 3.2% one mentioned) - and deal with transferring my past ISA's somewhere else after May.

I kinda like having all my money in one place!
Are other people in this position?
Any advice would be much appreciated!

david78

There are no issues transfering ISAs that include "current years" contributions.

The only issue is finding a decent rate and an account that allows transfers in.

Parisian

Thanks David..... Do you think it would be better to have 2010/11 in a top-rate account, and just transfer my past ISA amount into the best transfer-in I can find come end of May?

I guess I'm kinda hoping a good rate will come along for new and transfer ins like it did last year!

Ditch_Crawler

Hi Parisien, I just had a long conversation with the truly excellent 1stDirect call centre. The upshot was that even 1stDirect takes weeks to deal with an ISA transfer, and uses cheques in the post to transfer funds. Effectively, this means that you have to write off 10-15% of your year's interest to allow for the period during which your money is lost in 'banker-space'. This gets stupidly close to wiping out the tax advantage of opening the account in the first place.

As things are, I can see little point in transferring funds from one ISA to another - just withdraw your ISA money when the interest rate collapses, and put it in the best taxed savings account which best suits your needs.

Ditch

rb10

Ditch_Crawler wrote: »

Hi Parisien, I just had a long conversation with the truly excellent 1stDirect call centre. The upshot was that even 1stDirect takes weeks to deal with an ISA transfer, and uses cheques in the post to transfer funds. Effectively, this means that you have to write off 10-15% of your year's interest to allow for the period during which your money is lost in 'banker-space'. This gets stupidly close to wiping out the tax advantage of opening the account in the first place.

As things are, I can see little point in transferring funds from one ISA to another - just withdraw your ISA money when the interest rate collapses, and put it in the best taxed savings account which best suits your needs.

Ditch

15% of your interest is nearly two months - and although ISA transfers can take a very long time, few are this long.

Bear in mind that some banks will transfer ISAs electronically, although as you point out, First Direct still rely on the old fashioned method of a cheque in the post.

If you are concerned about having to transfer your ISA from one bank to another, and the loss of interest incurred here, then you could always just keep it with one provider, one who allows you to switch between their products, which would normally be an instant transfer.

Ditch_Crawler

rb10 wrote: »

If you are concerned about having to transfer your ISA from one bank to another, and the loss of interest incurred here, then you could always just keep it with one provider, one who allows you to switch between their products, which would normally be an instant transfer.

I'm not sure how many of those providers exist!

As things are, it seems to me that ISAs are a good short-term bet, but if you want to accumulate funds over a period of years, the long-term taxed accounts are just as good, and you don't have to keep moving.

rb10

Ditch_Crawler wrote: »

As things are, it seems to me that ISAs are a good short-term bet, but if you want to accumulate funds over a period of years, the long-term taxed accounts are just as good, and you don't have to keep moving.

But if you want to get a good rate on a taxable account, then you do have to regularly move it.

Increasing numbers of accounts now come with short-term bonuses, so need to be moved regularly.

Parisian

I will definately NOT be withdrawing 7 years or so of tax free savings... who knows what will happen in the future?

Ditch_Crawler

Parisian wrote: »

I will definately NOT be withdrawing 7 years or so of tax free savings... who knows what will happen in the future?

If you plan to tie up your savings for as long as another 7 years, then I would seriously look at a single longterm taxed investment as a viable alternative to lots of shortterm ISAs

Ditch_Crawler

rb10 wrote: »

But if you want to get a good rate on a taxable account, then you do have to regularly move it.

Increasing numbers of accounts now come with short-term bonuses, so need to be moved regularly.

I was thinking of 2/3/4 year fixed investments

rb10

Ditch_Crawler wrote: »

I was thinking of 2/3/4 year fixed investments

But you can do exactly the same with ISAs ... fix them for several years at a time, then you don't lose out on the time that it takes to transfer them every year.