Fixing a Cash ISA - Process?

mgarl10024

Hi all,

Just basic ISA advice would be useful please

I have an ISA which I've paid the full £5340 in during this tax year 2011-2012.
In the new tax year 2012-2013, I intend to pay in the full amount (I think £5640?) however I don't have the cash right now - it'll be paid in as the year progresses.

What I'd like to do, is to lock away the £5340 in a fixed rate ISA for a year, perhaps 2 or 3 depending on the rates.

So, how does this work? Like this?:

1) I have my current ISA with bankA
2) I don't touch my ISA after April, so it becomes dormant
3) I set up a new ISA with bankA or bankB, and start paying in my new 2012-2013 allowance as it becomes available
4) At my leisure, I shop around for the best fixed rates, then contact bankA or bankB who suck the funds into a fixed ISA product and lock it away. Does this transferring of the old isa, or the setting up of the next fixed product, make either of them "active" so I would end up with 2 active ones which isn't allowed?

Am I close?

Thanks,

Linton

Your description is essentially correct. ISAs are identified separately by the tax year during which they were paid into. Transfers of previous years' ISAs dont affect your current year's situation in any way.

pqrdef

In general, you can transfer your current ISA any time you like. There are limited offers around that may not last until April.

If you transfer before 6 April, you have to transfer the whole amount and close the account.

But watch out for any restrictions attached to any "bonus" interest on your current ISA. They may have designed it so that you lose out if you don't keep it for a year from opening.

psychic_teabag

One possible alternative short-term tactic, if it suits your cashflow, is to start a regular saver now and build up next year's ISA pot in there. When it matures this time next year, use it to fund an ISA (which could be fixed if you wish).

I think you can currently get 8% in a regular saver, when beats instant-access ISA even after tax is taken off. Or there are some paying 5%.

thenudeone

If you are worried about losing out on good offers, you don't always have to fund an ISA immediately you open it. It depends on whether the provider insists on immediate funding.

For example last year I opened a Santander Flexible ISA in March (because it was offering the best rate by far). I already had a cash ISA that I had funded in that tax year so I couldn't put any money in, so I waited until 6th April before funding it.

The only potential downside is that the bonus period will probably start on the opening date, not the date you fund it. But - you can assess the situation when you have the funds. If a better offer has become available, just ignore the earlier account - the provider will probably close it eventually and it doesn't count as a subscription because you haven't put any money in.

Be careful with regular savings ISAs. if you open one in say, June, and have to make 12 monthly payments, you will be forced to start using the NEXT tax year's allowance, and you may lose out on the best offers which sometimes do not allow transfers in.