What to do with ISA after Interest Has Been Paid?

vicki488

Hi Everyone!

My Santander ISA's interest was paid on 2/3/12. I know that it is not wise to leave the money in the ISA once the interest is paid so I would like some advice on where to put the money now. Ordinarily I would transfer it to a new ISA for the new year but I am saving the money for a deposit for a house and will more than likely need to withdraw the funds within the next 3-4 months. I also have a Santander E-Saver account and I was wondering whether it would be wise to transfer the money from the ISA into there so that it is alongside the rest of my savings. The interest rate is 3% on the e-saver. As far as I am aware there is no limit to how much I can put in the e-saver and I receive interest monthly for this account.

Any advice is greatly appreciated!

Thanks:D

Nine_Lives

vicki488 wrote: »

I know that it is not wise to leave the money in the ISA once the interest is paid

Why not?

I maxed out my ISA 6th April 2011 @ Santander in their 3.5% easy access ISA.

My interest was paid early March like you, yet my rate only changes on 29th March when i drops to 3.5%

So let's say interest was paid 1st March. From 1st March to 28th March, it's STILL getting 3.5% - and that can't be touched by anything for a 1yr saver, other than Santander's 1yr FIXED, which is a bit flexible, but has its limitations.

badger09

vicki488 wrote: »

Hi Everyone!

My Santander ISA's interest was paid on 2/3/12. I know that it is not wise to leave the money in the ISA once the interest is paid so I would like some advice on where to put the money now. Ordinarily I would transfer it to a new ISA for the new year but I am saving the money for a deposit for a house and will more than likely need to withdraw the funds within the next 3-4 months. I also have a Santander E-Saver account and I was wondering whether it would be wise to transfer the money from the ISA into there so that it is alongside the rest of my savings. The interest rate is 3% on the e-saver. As far as I am aware there is no limit to how much I can put in the e-saver and I receive interest monthly for this account.

Any advice is greatly appreciated!

Thanks:D

I think you've misunderstood. It is not wise to leave money in an ISA when the interest rate drops, either after the initial bonus has ended or at the end of a fixed term when again, the rate usually drops. Advice is to transfer to a provider paying a better rate.

I wouldn't transfer the money to your easy saver as you'll lose the tax free benefit which could continue until you need the money for your house deposit. Can you transfer it to the new Direct ISA 3.3%, which is instant access, and to which you could add further savings after 6th April, and earn tax free interest until you buy your house?

VT82

If it's a choice between 3.3% tax free, or 2.48% after tax (3.1% gross) for a few months, I know which I would pick.

Plus, if I were you I'd keep it in the ISA wrapper for as long as possible, just in case the unexpected happens with the house.

In case you're worried, if you close your ISA before the interest is added, you will still get the accrued interest added to the balance when you close it.

Sailmakers

If it has had it's interest drop to the standard 0.5% upgrade to direct ISA issue 9 for 3.3%. 2 second job.

vicki488

Thanks everyone. I think i'm rather slow on the uptake when it comes to savings. If I move the money to another ISA for the new year and then I need to withdraw the money in say 3 months then will I not be subject to loss of the interest for whatever the period that particular ISA stipulates and possibly end up with no interest?

CLAPTON

vicki488 wrote: »

Thanks everyone. I think i'm rather slow on the uptake when it comes to savings. If I move the money to another ISA for the new year and then I need to withdraw the money in say 3 months then will I not be subject to loss of the interest for whatever the period that particular ISA stipulates and possibly end up with no interest?

in general, your interest accrues on a daily basis so you earn the interest as you go along even if it is only actually paid into your account once a year.

if you move your ISA remember you must ask your new ISA provider to move the money for you.

Eco_Miser

vicki488 wrote: »

Thanks everyone. I think i'm rather slow on the uptake when it comes to savings. If I move the money to another ISA for the new year and then I need to withdraw the money in say 3 months then will I not be subject to loss of the interest for whatever the period that particular ISA stipulates and possibly end up with no interest?

Yes. But if you think you will need the money in three months time, you transfer to an instant access ISA, where there is no penalty for withdrawals.