First Direct to launch 6.25% mini cash ISA

sly_dog_jonah

Reaper wrote:

sly_dog_jonah, you can only transfer £3k of it.

kinesin, I don't understand your plan. "No-transfer" means you can't transfer it!

Then it's not really worth the hassle! 1% extra (compared to M&S) for 6 months would only work out at ~£15 (or ~£30 if i put 2005/6's £3k in there too) extra interest, ignoring any loss of interest involved in the transfer. If I could transfer the whole lot it would be £115-odd extra, which would be worth my time and effort

Reaper

rockrat wrote:

so if the standard rate does not alter at all, after october it returns to 4.35% that would make an average of 5.25% over the year, which is not the best out there, but then not the worst. As an avid supporter of FD and the excellent service they have given in general banking then i am gonna go with it, unless anyone knows something different that would make me reconsider...............!!

It's better than that as it seems you can transfer it to another provider paying a higher rate after October, making the average for the year look much better.

007

can someone clear this up for me...

On their webite FD say the interest rate is 6.25% AER, but only 6.08% tax free ... but i though the point of isas is that they're all tax free ... so why do they quote two figures and which one is right?

isasmurf

They're both right. First Direct's ISA is unusual in that it pays interest monthly. Most ISAs pay interest annually. The interest you are paid is 6.08%, but if the interest remains in the ISA then it is equivalent to 6.25% over the year. This is because the interest paid in one month earns 6.08% interest in subsequent months, and builds up over the year.

lipidicman

isasmurf wrote:

They're both right. First Direct's ISA is unusual in that it pays interest monthly. Most ISAs pay interest annually. The interest you are paid is 6.08%, but if the interest remains in the ISA then it is equivalent to 6.25% over the year. This is because the interest paid in one month earns 6.08% interest in subsequent months, and builds up over the year.

Its 6.08/12 in one month (assuming average month length) which is 0.50666%

Now as a multiplier 0.50666% is 1.0050666
ie multiply the capital by 1.0050666 to give you (capital+interest for month)

Finally to calculate the compounding
1.0050666^12 = 1.0625232369332871481026363389549

so the yearly multiplier is 1.0625 or 6.25% as a percentage

6.08 gross paid monthly is 6.25% AER

The difference stems, as ISAsmurf correctly identified from the period of interest payments

ie if was yearly then the gross rate is the same as the AER

Hope that helps you understand it

the lesson endeth

simonkirkland

I can confirm that you cannot transfer more than £3000 plus interest to the new FD ISA.

Despite what they told me on the phone when I asked for an application you are unable to transfer any ISA's of more than £3000. (I know £3000 is the usual limit for an ISA but I want to transfer previous years ISA's)

I tried to transfer £6700 from another supplier (2 previous years ISA with interest) and open an new 04/05 isa (as I hadn't opened one this year) with a £3000 cheque.

I received a message on my internet banking telling me that the most I could transfer was £3000 (plus interest) to this years ISA and I could not also open a new ISA with £3000 as this would be over the legal £3000 limit.

I phoned up and they confirmed this and gave me the choice of transferring some of the £6700 isa (assumable the equiv of £3000+interest - not sure how they'd work this out?) or open a new one online with the £3000 cheque. I chose the later option and I will look elsewhere to invest the £6700 which is currently only earning 4.?% with Smile. I'd like an internet based supplier ideally but not A+L as they charge fees to leave once there rate turns crap...

Hope this helps some people..

Simon

lipidicman

simonkirkland wrote:

I received a message on my internet banking telling me that the most I could transfer was £3000 (plus interest) to this years ISA and I could not also open a new ISA with £3000 as this would be over the legal £3000 limit.

This would be 'legal' but I guess it breaks FD's T&Cs. You would be transferring previous years ISAs and paying in this years contribution, all fine in a 'normal' ISA

ISAs are your first port of call, and the last money you should touch. You make money from the tax break and saving long-term from the compound interest. A few months of a high rate is good, but only if you can get it in easily and out at the end. Is it me or are there are more and more headline grabbing rates with annoying T&Cs?

p.s spot on about A&L - just makes me lose trust when I have to pay to move MY MONEY. A transfer fee if the rate was FIXED would be fine - but when it is variable you get no guarantee. In fact it says to me 'we plan to drop our rate'

simonkirkland

I've decided to transfer my other ISA's to Marks and Spencer as they have 5.25% at the minute and guarantee to be 0.25% above B of E until April 2006. I also have an isa from 03/04 with them and have the forms to be able to transfer easily.

Thanks all

Simon

empfun

So folks, what would be the interest earned at the end of a full tax year with a full deposit of £3000 with this FD e-isa? Anyone? Anyone? lipidicman?

jimclark1967

empfun wrote:

So folks, what would be the interest earned at the end of a full tax year with a full deposit of £3000 with this FD e-isa? Anyone? Anyone? lipidicman?

I think the idea is to transfer to something better when the First Direct rate drops in October - otherwise the advantage of having the account is eroded by a poor rate for the second 6 months of the tax year.