Whats best isa? - 3.50% Fixed 1 Year Or 3.50% Easy Access Variable ISA ?

wizard102

Ok I have around £30,050 in my isa.

Now I've been looking around and I see Natwests E-Isa gives 3.50% Variable - natwest. com/ personal/savings/g2/isas/e-isa.ashx

Or theres santander 1 year fixed isa which gives 3.50% fixed but you have to lock your money away for a year.

So whats better ?

Is it correct that the Natwest E-isa as it has a 1% fixed bonus and the rest is variable, after 2 months the variable bit could go to 0.5% and then I would only get 1.5% interest ?

Also Natwest E-isa pays 3.50% interest monthly . Does that mean at the end of the year I will have more interest received overall, as each month theres more money due to the interest so its 3.50% of that amount ?

What one do you think I should choose ?

DragonQ

It's very unlikely that a variable rate ISA would drop unless there was a base rate drop.

wizard102

Thanks so you reckon it should only go up and not down ?

That might be better than the fixed rate isa then.

Anyone know about the interest paid monthly. Does that mean I would receive more at the end of the year than if it was paid annually

psychic_teabag

Be aware that with natwest the bonus won't kick in until the middle of May. Until then, it will be earning less. You will get a full 12 months bonus, but only if you leave it until the middle of next May, by which you might have missed the best of next year's accounts.

The gross rate is 3.47% : with compounding over 12 months, it will give an overall rate equivalent to 3.50% annual interest - that's what AER means. But that AER applies only for the period middle-of-may to middle-of-may, not 1 year from account opening. (I assume - just from a quick look at the details.)

wizard102

Thanks, surely if there is a better account next year I can simply transfer my natwest e-isa into this new account even if I've only used 11 months of the bonus as there is no penalty and you don't loose the bonus?

Also is the 3.50% interest on balances over £30000 mean you get 3.50% of the full £30000 . Or only 3.50% of the amount thats over £30000 ?

If I transfered in £26000 from an existing isa, then topped this isa up with this years allowence to over £30000 would my interest automatically change to 3.50% ?

One last thing, I take it you can transfer existing isas to a new isa as many times as you want in the tax year, as long as you've not gone over your allowance ?

psychic_teabag

wizard102 wrote: »

Thanks, surely if there is a better account next year I can simply transfer my natwest e-isa into this new account even if I've only used 11 months of the bonus as there is no penalty and you don't loose the bonus?

Sure. But you've had 6 weeks of no-bonus and 46 weeks of 1% bonus, so the effective bonus is 0.88% for the year.

Do you tend to transfer an ISA as soon as the bonus expires, or do you wait 6 weeks before doing so ? The way I see it, natwest are effectively moving that 6-week period to the start of the ISA.

One last thing, I take it you can transfer existing isas to a new isa as many times as you want in the tax year, as long as you've not gone over your allowance ?

You can transfer existing isas as many times as you want. There is no applicable allowance for transfers. The allowance applies only to new subscriptions within a year.