Bank of Scotland ISA Direct Reward - interest reduction

spaceboy

It's currently 3% but I got a letter a few weeks ago saying it's going down to 0.5% on 1st May this year! Absolute joke. Going to transfer the money to my Online Saver which gives 2.8% but not tax free.

Do I have any other options?

talana

Do I have any other options?

Yes, course you do!
Transfer it to another ISA and continue to enjoy tax-free interest.
Plenty to choose from, just make sure you pick one that accepts transfers in.

And follow the correct transfer procedure, don't remove the cash from the ISA wrapper

It's currently 3% but I got a letter a few weeks ago saying it's going down to 0.5% on 1st May this year!

By the way, that happens with lots of accounts, not just ISAs and not just BoS

Mr_K

spaceboy wrote: »

Going to transfer the money to my Online Saver which gives 2.8% but not tax free.

Are you sure you want to do that? The money would lose its tax free status forever. Halifax (basically the same outfit as BOS), have a 3% ISA which should be easy to transfer to, or Santander have a 3.3% one.

psychic_teabag

For Halifax, you can just fill in an online form and they'll redesignate the account (slightly simpler than doing a transfer - acct number stays the same). Can't immediately see the corresponding form on BOS website, but you can probably also do it by phone.

Mandelbrot

Lloyds Banking Group seem to be intent on separating the 'Halifax' and 'Bank of Scotland' brands as much as possible, so it might no longer be possible to open a Halifax ISA via BoS. And although BoS will no doubt allow you to retain an old Halifax account (for a while anyway), no one is likely to want to do that once the rate drops steeply.

If you can't redesignate to a new Halifax ISA, the two obvious BoS ISA choices seem to be a 2.75% Access Cash ISA (and that pathetic rate only for 18 months - though it beats 2.8% if you are a taxpayer)
http://www.bankofscotland.co.uk/isas/cash-isas/access-cash-isa/
or a 1-year Fixed Cash ISA at 3.15%.
http://www.bankofscotland.co.uk/isas/cash-isas/fixed-cash-isa/

opinions4u

It's currently 3% but I got a letter a few weeks ago saying it's going down to 0.5% on 1st May this year! Absolute joke

You mean like they told you it would on the day you opened it?

spaceboy

opinions4u wrote: »

You mean like they told you it would on the day you opened it?

Eh, yeah. Well done for working that out.

spaceboy

Mr_K wrote: »

Are you sure you want to do that? The money would lose its tax free status forever. Halifax (basically the same outfit as BOS), have a 3% ISA which should be easy to transfer to, or Santander have a 3.3% one.

How can money lose it's tax free status forever?

scottishblondie

spaceboy wrote: »

How can money lose it's tax free status forever?

Because once you take it out of the ISA it's out - you can only put back in the amount allowed by the current year's ISA allowance.

So if you have £10k in your ISA and you move it to a normal savings account, you can only put £5640 of it back this year, leaving you with £4360 in a normal savings account, paying tax on the interest. Then you would have used up your 2012-2013 allowance, so you wouldn't be able to add any "new" money.

You need to find a better ISA and follow the transfer procedure to keep the money in the tax-free wrapper and preserve your 2012-2013 ISA allowance.

Andystriker

spaceboy wrote: »

Eh, yeah. Well done for working that out.

Looks like you never worked it out

opinions4u

spaceboy wrote: »

Eh, yeah. Well done for working that out.

Well why is it an absolute joke then? They are doing exactly what they said they would do.

No joke. Delivering exactly what it said on the tin. So nothing for you to whine about.

Now you have some choices.

1) Do nothing. The bank makes lots of money out of you.

2) Move it, as you suggest, to an easy access account that isn't an ISA. You start paying tax on your interest.

3) Ask BoS what options there are regarding your ISA. They can transfer it to a better ISA.

4) Find a new ISA provider paying a decent rate and ask them to organise a transfer. Don't do it yourself.

Option 3 would probably have the best mix of convenience and price. Option 4 would probably get your money working hardest.