Newsletter ISA question

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In the latest newsletter there's this bullet point:

Warning - stop any ISA direct debits now, or you'll auto-start one next year. Cancel any regular payments into this year's ISA unless you want to be subscribed for next year with that provider.

But in other places on the website I get the gist that even if you do pay into your old ISA after the allowance is reset, if your ISA doesn't have a transfer out penalty then you can just transfer it when the interest drops.

I have a Cash ISA with Santander that matures in the summer. To maximize the high interest period, I don't want to open a new ISA just yet. And as far as I can tell from Santander's website, I can "upgrade" (that's what they call it) my current ISA to their latest issue in branch or over the phone. So is it safe to feed this ISA now and "upgrade" it in the summer?

oldvicar

I think that will be fine if you know that you will be happy with whatever the Santander upgrade offer will be in the summer, or find a better deal which accepts transfers in. But a lot of unknowns there.

What you might miss out on is any special deals which other providers might offer which are open only to 'new money' and don't accept transfers-in. Whilst the HMRC tax rules permit in-year transfers, the banks aren't forced to let you transfer in to their new products if they don't want to.

For example, starting today Nationwide are offering a Flexclusive ISA offering 4.25% (or more) if you have or open their current account. But they don't accept transfers in to this ISA, so it would not be available if you have made any payment to an existing ISA account since 6 April.

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As far as I can understand, if I find a bank that would do it, I could transfer in-year from Santander as soon as the interest drops even though I paid towards this year's allowance. Even if I take out a new ISA with someone else rather than feed Santander, as long as I only feed one ISA within the tax year.

The "upgrade" path is mentioned on Santander's website, but even if it weren't, I'd still call them up and ask if they really really really really want me to move my money to another bank, because I'd rather 2.8% from somewhere else if they won't give me their 3+% instead of their 0.5%. And if me taking my business elsewhere is fine by them, then it's fine by me too

Direct.gov.uk could really link to this page: http://www.hmrc.gov.uk/isa/transfer-isa.htm on their ISA page. I googled quite a bit with various terms to find it.

With that out of the way, I need to see what rates the banks that accept transfers would pay if you're only going to transfer old money in without subscribing this year's allowance with them, and draw a plan up.