Fix my ISA for 2 years and open another?

kaiserphoenix

Hi guys, I currently have 14359.67 in my cash ISA.

Now, should I fix this amount for 2 years on a 3.9% Natwest ISA? The 2 year fixed means I cannot actually pay in any additional money and will therefore have to open "another" ISA for this year's allowance.

OR, should I go for a lower interest rate like 2.8% but keep ALL the money in the same "wrapper" so to speak so I keep accumulating.

I made a spreadsheet and it turns out that if I fix the above amount for 2 years and open another wrapper, i will get more interest than trying to keep everything in the same wrapper in a lower interest rate (assuming 3%)...But not sure about future ramifications of having multiple wrapper.

So, several assumptions:

Keep 14359.67 in 2 year fixed at 3.9% + 5640 in ANOTHER wrapper?

or 14359.67 + 5640 into the same wrapper at a lower interest rate?

Thank you so much and apologies for the lengthy post.

rpc

No issue with that at all, as long as deposits are only made into one cash ISA per tax year.

Stick as much as you can into as high an interest rate as you can. Just don't break ISA rules. Once the fixed ISA matures, you can transfer the two ISAs into one.

I've just transferred my cash ISA to a fixed one, will open a new cash ISA alongside it in 2013/14 and also have a S&S ISA - so three wrappers. Nowt wrong with that if it makes you more money.

kaiserphoenix

rpc wrote: »

No issue with that at all, as long as deposits are only made into one cash ISA per tax year.

Stick as much as you can into as high an interest rate as you can. Just don't break ISA rules. Once the fixed ISA matures, you can transfer the two ISAs into one.

I've just transferred my cash ISA to a fixed one, will open a new cash ISA alongside it in 2013/14 and also have a S&S ISA - so three wrappers. Nowt wrong with that if it makes you more money.

Oh so you can actually "Combine" 2-3 wrappers into 1 single wrapper later on??

psychic_teabag

If you have paid anything into your ISA this year, you can't start another one until next financial year.
However, clearly that ISA includes money from previous years : you should be able to do a partial transfer of that component out, leaving behind money paid in this year.

But if you haven't paid anything in yet, then yes, go ahead and open a new ISA somewhere else and fix this piece.

There's no reason (other than preference) to keep all your accumulated cash ISA money in one account.

Just FYI there's no reason to resort to a spreadsheet for calculating the effect of splitting the money up. Interest is proportional to amount invested, so the interest is the same same whether you think of two pots X and Y at 3%, or a single pot containing (X+Y) at that same rate. So in your case, X is the existing money and Y is the new money. Whatever you do, the new money will be earning the instant-access rate (say 2.8%). If you leave it all together, the old pot X will earn at 2.8% too. If you move the old pot, X will be earning at 3.9%.

[well, I find it easier to think in those terms, anyway.]

BTW check whether natwest are really giving you 3.9% : they have a habit of sitting on the money at 0.5% for a while before giving you the headline rate. Though for 2 years the effect of that won't be too significant.

kaiserphoenix

psychic_teabag wrote: »

If you have paid anything into your ISA this year, you can't start another one until next financial year.
However, clearly that ISA includes money from previous years : you should be able to do a partial transfer of that component out, leaving behind money paid in this year.

But if you haven't paid anything in yet, then yes, go ahead and open a new ISA somewhere else and fix this piece.

There's no reason (other than preference) to keep all your accumulated cash ISA money in one account.

Just FYI there's no reason to resort to a spreadsheet for calculating the effect of splitting the money up. Interest is proportional to amount invested, so the interest is the same same whether you think of two pots X and Y at 3%, or a single pot containing (X+Y) at that same rate. So in your case, X is the existing money and Y is the new money. Whatever you do, the new money will be earning the instant-access rate (say 2.8%). If you leave it all together, the old pot X will earn at 2.8% too. If you move the old pot, X will be earning at 3.9%.

[well, I find it easier to think in those terms, anyway.]

BTW check whether natwest are really giving you 3.9% : they have a habit of sitting on the money at 0.5% for a while before giving you the headline rate. Though for 2 years the effect of that won't be too significant.

Thanks for that. According to my spreadsheet (im not that numerically great haha)

If I leave it in a 3.9% Natwest, I get after 2 years an interest of 1141.89.

Now if I put in next financial year's allowance in april and dump the money into a lower ISA, say 3%, then add 5640 (assuming that is the allowance next year) then I get a total of 1387.18.

Now there is a difference of 200 there, but then the 1st example is missing the fact that I can start a new iSA. So assuming I start a new one and deposit money in their twice, I get an interest of 512.67.

So all in all it looks like splittinig it up gets me the most interest...

innovate

psychic_teabag wrote: »

If you have paid anything into your ISA this year, you can't start another one until next financial year.

Are you sure, is this what you were meant to say?

What you cannot do is pay new money into more than one ISA in any one tax year - but you can open as many ISAs as you like, and have your previous ISA(s) transferred - provided, of course, the new ISA allows transfers in, and your previous ISA isn't subject to any fixed term arrangement.

Some providers, such as NatWest for their current fixed rate offer, will insist that the full amount paid for the current tax must be transferred (whilst for previous years, you can request transfer of some, or all or your money - - - provided your old provider allows this).

rpc

kaiserphoenix wrote: »

Oh so you can actually "Combine" 2-3 wrappers into 1 single wrapper later on??

Yes, with certain restirctions. Cash ISAs can be transferred into Cash ISAs so 3 Cash ISAs can later be all transferred into one. Cash ISA can also be transferred into S&S, but a S&S ISA cannot be transferred into a cash one.

psychic_teabag wrote: »

If you have paid anything into your ISA this year, you can't start another one until next financial year.

innovate wrote: »

Are you sure, is this what you were meant to say?

What you cannot do is pay new money into more than one ISA in any one tax year - but you can open as many ISAs as you like, and have your previous ISA(s) transferred - provided, of course, the new ISA allows transfers in, and your previous ISA isn't subject to any fixed term arrangement.

Innovate is correct. Once you have made a deposit into one cash ISA, you cannot deposit into another in the same tax year. You can, however, transfer money as often as you wish. I am currently doing exactly this - I paid into my Halifax ISA back in May. I am now transferring that as the bonus period is ending.

psychic_teabag

innovate wrote: »

Are you sure, is this what you were meant to say?

Yes, but I guess I didn't make it clear that "pay in" for me means deposit new funds. I wouldn't consider a transfer to be paying in, but I guess others don't use the terms in the same way, so thanks for clarifying.

(I tend to think in terms of the money crossing the line from "outside the isa world" to "inside the isa world")

kaiserphoenix

Thank you everyone for your inputs, I am now going to wait a bit until the banks start revealing their hands.

oldfella

rpc wrote: »

Yes, with certain restirctions. Cash ISAs can be transferred into Cash ISAs so 3 Cash ISAs can later be all transferred into one. Cash ISA can also be transferred into S&S, but a S&S ISA cannot be transferred into a cash one.





Innovate is correct. Once you have made a deposit into one cash ISA, you cannot deposit into another in the same tax year. You can, however, transfer money as often as you wish. I am currently doing exactly this - I paid into my Halifax ISA back in May. I am now transferring that as the bonus period is ending.

to be precise - you can deposit, then transfer, then deposit into the new ISA assuming you havent reached the limit

what you cant do is to deposit into 2 open ISAs

Seany

Kaiser,

I've done the same as you - with an almost identical amount.

However there is one thing you seem a little wrong on, you state that you can't pay any further money into your fixed rate ISA once open.

You CAN pay into the ISA every year for the next two of the fixed rate - in fact not only that but if i remember the terms correctly, you have to pay in at least £1000 a year for the fixed term!