ISA Transfer

Nediachick

Hi,

I hope someone can help me with my questions - thank you in advance.....here goes:

My son, who is 18, at uni and is not working at the moment (so doesn't pay tax), has an ISA account with the Halifax. He's had a letter to say that on 30th March 2012, the current rate (3.00%) will be ending and it will go down to 0.50%.

Any interest he's earned during this time won't be paid until 4th April, so he'll keep the money in there until then.

Is it worth just closing the ISA account down after the interest has been paid and just putting the money in a normal savings account with a good rate, and as he doesn't pay tax, filling out an R85 form, or would it be better to transfer the whole lot into another ISA with someone else?

Many thanks,

Diane

McKneff

Which ever way is easiest for him really, If transferring into a new ISA, let the new provider do the transfer though.Check first that they accept transfers in.

pinkdalek

He can change his ISA with the Halifax after the 30th March to whatever current deals are available at the time and earn better than 0.5%.

As for transferring the ISA, I suppose it boils down to how much there is in there at the moment and how much more he plans on saving in it for the next 12 months.

For example if he had £1000 in it and only would save £100 per month in all fairness it is easier to close it and open a new ISA elsewhere as realistically it is not going to affect ISA limits.

But if he has £4000 + in there then do the transfer as to not affect 2012/13 ISA limits of £5680.

redmalc

AA one year fixed 3.6% wold be better for him if the money is not needed

opinions4u

redmalc wrote: »

AA one year fixed 3.6% wold be better for him if the money is not needed

Product withdrawn.

xylophone

It seems to me to be worth preserving the ISA status as it is "use it or lose it" each year - there is plenty of information about best rates available and there might be offers at the start of the new ISA season.
http://moneyfacts.co.uk/compare/savings/accounts/search/

MoneySaverLog

If he takes the money out the ISA now and puts it into a standard account and claims the interest, then later in life when he becomes a tax payer he will lose the tax free status of that money.

Far better to keep it in a ISA if he can, use transfer forms and not physically withdraw the money himself. Once it's withdrawn that amount can never be re-invested later that tax year or ever again, that part of the allowance has gone forever.

psychic_teabag

Nediachick wrote: »

My son, who is 18, at uni and is not working at the moment (so doesn't pay tax), has an ISA account with the Halifax. He's had a letter to say that on 30th March 2012, the current rate (3.00%) will be ending and it will go down to 0.50%.

Any interest he's earned during this time won't be paid until 4th April, so he'll keep the money in there until then.

Is it worth just closing the ISA account down after the interest has been paid and just putting the money in a normal savings account with a good rate, and as he doesn't pay tax, filling out an R85 form, or would it be better to transfer the whole lot into another ISA with someone else?

3% presumably means it's an instant-access acount. Closing or transferring the account will probably cause the accrued interest to be paid immediately : don't necessarily have to wait until 4th April.

On whether to keep it in an ISA : it depends on whether it will be spent before he becomes a taxpayer. But it also depends on how much more he will be saving before he becomes a taxpayer.

If he won't be saving any more before, say, a couple of years time, he has another couple of year's ISA allowance before he becomes a taxpayer, so he could take it out now, and put it back in using next year's ISA allowance, getting a better rate from a non-ISA account in the meantime.

Currently, you can get better rates outside of an ISA. However, last March/April, IIRC you could get better rates inside an ISA than outside. So I'd be inclined to wait until closer to the time before making a decision. Withdrawing from an ISA is an irreversible step.