Cash ISA limits

Wookiee

Hi all,

I opened a cash ISA in 2010 with the full amount permitted at the time. Since then, I've done nothing with it, and it's obviously now dropped to the basic interest rate. So I'm looking to move it to get a higher rate.

I keep reading that you can only put £5640 into a new cash ISA. However, I've also seen suggestions of higher balances. I'm not talking about the additional stocks & shares ISA allowance, but purely cash ISA.

Reading around, it's not clearly stated, but I get the impression that you can actually put more than the 'limit' into an ISA if you transfer old ISAs across. Would I be right in thinking that, as it's now a new tax year, I can open the new ISA with new money, and transfer in my old ISA balance, giving me a total balance higher than the 'limit'?

i.e. Could I open the new ISA with, say, £3000 - and then transfer in the balance of my old ISA, giving me a total of £8000+?

Thanks in advance for your comments/assistance.

Lokolo

The limit is the amount you can deposit in 1 year.

So yes, over multiple years you can have total amount beyond this year's limit.

So your example, yes you open with say £3k (then you have £2,640 left of this years allowance) and transfer old ISA to it.

BUT not all ISAs allow transfers and when you transfer an ISA you must do it through an ISA transfer form with the new provider.

Wookiee

Right. So I can open a new ISA with £3000, transfer my old ISA for a total balance of £8000+, and still add up to another £2640 to it before the end of this tax year, if I get the chance.

That's great, thanks very much. :T

All of the descriptions on the various banking sites (as well as many financial sites) seem to suggest that it's an absolute balance limit, that you cannot under any circumstances exceed it, and that if you want to save more you need to wait for a new tax year and open another ISA.

If it weren't for reading around on sites like this, I would most likely have had no idea about this, and would probably have left that old ISA earning a pittance while starting up a new one with new money, and losing out on the higher interest rate.

...and having just read that last paragraph back to myself, it becomes clear exactly why the banks don't advertise this in plain English! :embarasse :laugh:

thenudeone

Wookiee wrote: »

Right. So I can open a new ISA with £3000, transfer my old ISA for a total balance of £8000+, and still add up to another £2640 to it before the end of this tax year

Yes.

Wookiee wrote: »

All of the descriptions on the various banking sites (as well as many financial sites) seem to suggest that it's an absolute balance limit, that you cannot under any circumstances exceed it

Whilst a total balance limit would be easily understood, it wouldn't work very well for Cash ISAs because interest is added every year.

The rules are not easy to understand, particularly the fact that the total deposits mustn't exceed the limit, i.e. that you can't replace any money you take out. This rule is meant to encourage people to save for the longer term rather than just getting tax breaks on short-term cash savings.

As the rules are confusing, banks try to simplify it in their own words, sometimes better than others.

Glad you've found the site helpful.

MoneySavingUser

Wookiee wrote: »

Right. So I can open a new ISA with £3000, transfer my old ISA for a total balance of £8000+, and still add up to another £2640 to it before the end of this tax year, if I get the chance.

You can do this except in some cases where accounts only accept 1 deposit (usually fixed rate ones)

1) Some banks like Halifax will let you open a variable one put in your new money and do the transfer (so 2 deposits) and then let you convert that to a fixed rate one if you want

2) If you do open an account which only allows 1 deposit you won't be able to deposit the remaining £2640 of your allowance into it. Also you are only allowed to deposit new funds (i.e. not transfers) into one account per year* so you can't open a second account in this tax year for the remaining £2640

*Though in some cases you can deposit into more than 1 account as long as they are both with the same bank and the same ISA manager - though very few allow this IIRC

Wookiee

Thanks for the extra info.

The ISA I'm looking at is the Nationwide Online ISA Issue 4...

nationwide.co.uk/savings/cash_isa/onlineisa/default.htm

(I tried linking directly to the page, but as a new user, I can't)

I've just double-checked, and it allows transfers from previous ISAs and unlimited deposits (subject to the annual limit), so it seems to be perfect for my needs.

innovate

Just in case you don't know: you don't have to have all you money in just one ISA.

I.e. you could have your last year's ISA transferred to the Nationwide 3.1% , and you could put your 2012-2013 money into the Nationwide 4.25% one (assuming you meet their qualification criteria). Or you can put this year's money anywhere else. If you did that, you could in future years combine your money into one ISA.

Of course, it can be more convenient to have all the money in one place. Great to have a choice

Wookiee

Hey ho! Another year, another question, relating to the above...

The Nationwide ISA credits interest at the end of August. If I transfer the balance to their latest ISA now, will that interest still find its way to the account, or do I need to leave it until afterwards?

Related question: Why do they have this delay in crediting the interest, and not add it once the year is up?

Thanks!

badger09

Wookiee wrote: »

Hey ho! Another year, another question, relating to the above...

The Nationwide ISA credits interest at the end of August. If I transfer the balance to their latest ISA now, will that interest still find its way to the account, or do I need to leave it until afterwards?

Related question: Why do they have this delay in crediting the interest, and not add it once the year is up?

Thanks!

Assuming there are no penalties for transferring (Fixed rate/fixed term) then interest will be calculated up to the date of transfer and added to your ISA.

Some banks/building societies have set dates on which interest is credited, others credit on the anniversary of opening the account. Doesn't really make much difference in most cases as although its credited annually or on set dates, it is calculated daily .

Don't forget to use the proper transfer process!

Wookiee

Thanks badger!

Actually, looking through the details of the account to remind myself, the interest rate is 3.1% until the end of October this year. The top rate of Nationwide's current ISAs applicable to me is 2.25% - so presumably I'm better off leaving the money alone until then and adding what I can to it from this year's allowance, then moving it at the end of October..?

MoneySaverLog

Yes if they allow you to add more in at 3.1% then that's what I'd do. Done something similar with mine at LTSB.