Fixed term ISA

Kathh_2

I opened a 1 year fixed term ISA in November 2011. I now have some more money to invest in an ISA for tax year 2012/13. However when my 1 year fixed term ISA expires what happens to the money. Does it stay tax free or does the account become a regular savings account? I am a little confused and would like to know before I open a new ISA.

psychic_teabag

Usually, the fixed-term ISA will just "decay" into an instant-access ISA - still tax-free, but paying a poor rate. You can then use the ISA-transfer process to move it to somewhere paying a better rate, fixed or instant-access depending on your preference.

Sometimes the provider will write to you to ask what you want to do, and the default might be to reinvest for another term, if you don't reply. (Since they'd rather keep the money,) ISTR there was a thread on here recently where the provider wrote and didn't offer an instant-access ISA option, which we all thought a bit strange.

pqrdef

Note that if the provider writes to you, he may leave it late to restrict your options, he not have any good options to offer, and he may not mention what may be your best option - transferring to another provider on the maturity date. So really it's up to you to get organised in good time.