First Direct to launch 6.25% mini cash ISA

Reaper

Yes, you can do it. No, it's not really worth it.

You would be getting 1% extra. If it were a year that's £30 extra, but by the time they organise the transfer it will be late April (they seem snowed under). That leaves about 6 months, so it's now just £15 extra. Plus form filling and probably lost interest while your money is moved around.

If your ISA rate was worse then it might be worthwhile.

carpy

yeah your probably right although it would be abit more than £30 if i transferred £3k plus interest from this year and then £3k in the new tax year.

but then some of that would be lost in the two transfers plus the hassle of it all........ummmm not worth the effort me thinks!!!

lipidicman

Reaper wrote:

.....That leaves about 6 months, so it's now just £15 extra. Plus form filling and probably lost interest while your money is moved around....

You can make this opening a current account - £50 each if somebody refers you to Lloyds. A&L also have a deal, so do first direct and ING direct will give you a tenner for saving a pound!

BlackCat

jimclark1967 - many thanks for your help.

We've now applied for the FD ISAs online. 6.25% on all of the money we've stoozed seems very nice indeed!

empfun

Hmmm...I just got off the phone with FD customer services. I've been told that I would not be able to open an account for 2005/2006 e-ISA until 6th April 2005 onwards.

The thing is I recently received the forms from the online application, and the dates on the form state 2004/2005. But I've already opened a mini ISA account this current tax year already with Abbey.

I'm thinking of just changing the dates on the form so that it says 2005/2006 instead of 2004/2005 and initialing it and then sending it off. Any thoughts on this? Input muchly appreciated.

Milarky

I doubt if you can open an ISA in a different tax year to the you one require - even if you mark the forms appropriately. I don't know how long it would take, but if your were an exisitng FD customer already [are you?] then you could open an ISA online as soon as April 6th arrives - no paperwork. Otherwise just ask amend the forms as you suggest doing - but don't send them until April 5th so that they have to treat is as a '2005-06' subscription once they arrive.

empfun

Hi Milarky, unfortunately I'm not an existing FD customer so would probably send the self-amended form in just before 6th April. I could probably do with a bit of thrill in my life and hopefully the existing form doesn't evolve into something completely different. hehe. Cheers!

isasmurf

Legally you are allowed to make an application for an ISA for the following tax year at any time providing you do not put any money into the account before the 6th April. The ISA will only be opened when a subscription is made to the account.

ED

Am I missing something in my (rough) calculations, below, for placing £3,000 in a Mini Cash ISA at the start of the new tax year?


1st option : First Direct e-ISA, for HALF year :

6.08%* for 6 months till 6 Oct '05
4.27% for remainder of tax yr

---

5.175% for yr

* = FD advertise rate as "6.25% AER"

On 6 Oct '05, the ISA can be transferred to another provider. Total approx £3,092 (incl interest paid monthly for 6m). First Direct have informed my family: "The transfer process is actioned in accordance with the Inland Revenue regulations which means a cheque is sent to the new provider along with the necessary documents. Bacs payments cannot be sent."

Say 7 days nil interest while cheque sent postally by FD to new ISA provider + clearance = £3.21 lost (eg @ 5.40%) - [Idea: 6 Oct falls on a Thursday, so perhaps transfer on Mon 3 Oct, hoping to avoid weekend.]

Suppose effective 1st June Base Rate increases 0.25%, likewise alternative ISA (but not FD's ISA) :
moving £3,092 on 6 Oct '05 @ say 5.65% = £84 approx earned in remaining half of tax yr (minus approx 1 wk for transfer-in).

Total gain : £172.79 (£92 - £3.21 + £84)


2nd option : competitor's ISA for FULL year :

£3,000 @ perhaps 5.40% in A+L for approx 2 months = £27
+ ditto for approx 10 months @ 5.65% = £141.25
Total gain : £168.25 (+ compound interest)


£4.54 advantage using First Direct, instead of full tax year with rival ISA provider.

Conclusion : not worth bothering.

...Or am I missing something?

Milarky

ED wrote:

...Or am I missing something?

pheww!...

There is the option to pay in two tranches of money to the FD ISA of course- one for 2004-05 [or an amount transferred in from elsewhere] and then one for 2005-06 after 6th April which, since account will be set up and running, can be made by BACS and can be made to reach the account on 6th April itself and so benefit from a full 6 months at the promotional rate. Given it took eight days in my own case to transfer funds across, it doesn't make any odds when in the week the process is started I suggest.

Obviously, as this offer works on maximizing both balances and the 'time-in', any benefit is roughly doubled by doing this. The time to transfer the money out from FD again[and thanks for the clarification on why they use cheques rather than the obvious electronic means for those, BTW] will be exactly the same and does have to be factored in the balance.

In truth, I took this as an opportunity to put theory into practice by making an ISA transfer 'for a better rate'. As the 6th October approaches I would have the choice of either transferring it back [in my case to Nationwide ISAs, which continue in existence] or moving the proceeds to another ISA [Lambeth looks good] By having £6,000 to move it will have to be an ISA which does not apply a restriction to the size of transfer [which, as I discovered from this thread, FD ISA does depsite being 'CAT' standard]. Ideally, it then makes sense to effect two transfers [i.e. from FD and from Nationwide] at the same time - to 'double up' on any bonus rate period applicable.

[Just the way I'm thinking at the 'mo - but I will have to plan for a transfer away from FD]

All experiences are 'learning exercises' ED