Moving ISA savings to a current account without losing interest

jackpot_spaniel

Hi

I have a couple of ISAs that I need to transfer in to my Halifax current account. I’ve just bought a round the world ticket and I’ve bagged a Halifax Rewards Clarity to use for the trip. Now I just need to make sure I’ve got enough money in my current account to pay off the direct debit each month – that’s where my savings come in! This will mean no messing around moving money about whilst I’m away.

The big question: How do I move the ISAs in to my current account without losing the interest they’ve been earning?

I have one new Santander ISA (Flexible ISA Issue 3, I believe) for the 2011/12 tax year into which I paid the full allowance.

I also held a Barclay’s ISA for 2010/11 which I transferred into the top pick Halifax Direct Saver ISA at the beginning of the 2011/12 tax year. The transfer was the full allowance for 2010/11 plus the interest earned with Barclay’s.

Both of these ISAs pay the interest annually.

Am I right in saying that the only way to receive the interest from these ISAs and move the money safely to my current account without any loss of interest or tax-free benefits is to consolidate both of them into a new ISA using an ISA transfer (therefore getting Santander and Halifax to pay the interest owed) and then move all of the money out of this new ISA into my current account in a normal bank transfer?

I don’t want to mess it up!

Many thanks

wriggly

Generally, you get paid interest up to the date you withdraw, whether it is an ISA transfer or a proper withdrawal, so you should not need to do the ISA transfer.

It doesn't hurt to check your T&Cs or phone the banks first, though, especially for Fixed Rate ISAs which may have penalties for early withdrawal.

jackpot_spaniel

Having said all this... would it be better to only move money to my current account when I need it, making sure I leave at least £1 in each ISA. I'm assuming they would then pay the relative interest on the maturity date?

tanith

You will only get interest paid up to the date when you remove the money from the ISA.. they aren't going to pay interest for the whole year when you've removed the money. There is no point in keeping them open if you are going to empty them.. but if you leave the money in till you need it of course the interest will be paid to that date but there may be penalties..

Essenchill

Thinking aloud, perhaps this is too obvious... but if you remove all of the money except £1 from your ISA accounts, the interest earned on those £1 totals isn't really going to be worth having, whatever the interest rate, is it?

jackpot_spaniel

I'm assuming interest is calculated daily/weekly/monthly based on the amount in the ISA at the time of calculation, but only paid out annually?

tanith

jackpot_spaniel wrote: »

I'm assuming interest is calculated daily/weekly/monthly based on the amount in the ISA at the time of calculation, but only paid out annually?

If you close the ISA the interest will be paid up to that date and transferred to your linked acc, if you leave £1 in the ISA then the interest will be paid out annually if that is how your particular ISA works , check your t & c's

Essenchill

jackpot_spaniel wrote: »

I'm assuming interest is calculated daily/weekly/monthly based on the amount in the ISA at the time of calculation, but only paid out annually?

This is what I assumed, so your interest earned would decrease at the point you withdraw all but £1? You would then earn the interest rate on the £1 remaining in the account for the remaining duration.