Penalties for transferring balance from ISA

paulcIII

hello,
i currently have an ISA which has built over a few years. My provider recently added a sneaky 120 day penalty for withdrawals at renewal, simultaneously offering a headline decent interest rate. I have been with them for a few years and was disappointed at the change of tactics. I am on a fixed rate with a maturity date in 2013.
I am contemplating transferring the balance to an ISA with penalty-free access as I may need the money in the next year. Is my provider within its rights to penalise me 120 days interest if I transfer the balance, i.e. not withdraw? I am conscious that they may offer a much lower interest rate if I do not fulfil the full savings term.

Thanks

Paul

Yorkie1

If the 120 days' interest was part of the T&Cs when you started the fixed term then I can't see how you can argue against it even if you didn't actually read the specific T&Cs.

If it has been newly introduced since you started the fixed term then I can't see how they can argue it should apply to you. You signed up on the basis of a certain contract /notice period, and they can't change it subsequently.

That being said, many of the fixed term ISAs do have punitive withdrawal rules - many don't allow withdrawals at all during the fixed term. I'd categorise a transfer as the same thing as a withdrawal but you should look at the particular T&Cs to check whether they define it any differently.

From what you've said, the charges were introduced when you took out this particular product and therefore you would be bound by them.

If it's giving you a decent rate of interest, I'd leave it where it is unless / until you need to sacrifice the interest, rather than sacrificing the interest now irrespective of whether the need subsequently arises.