New Cash ISA?

ReallyBigMisterBig

I transferred my existing cash ISA from Halifax to Santander's 4% 2 year fixed rate Major ISA at the back end of the last tax year. I was advised by the in branch personal adviser that if I wanted to top up the fixed rate ISA with an additional deposit, I could provided I did it between 6th and 14th April 2012. As I had £240 available that week I did so.
Yesterday I visited the branch again to open an instant access cash ISA that I could save monthly into.
However I was subsequently told by them that I couldn't as I am only permitted under the HMRC rules to subscribe to one cash ISA! To say that I'm a little cheesed off is an understatement! Because I have made that additional deposit to the existing fixed rate ISA ~ to which they will no longer accept deposits, I cannot take advantage of the remaining £5400 of this year's allowance!!!!

However if I withdraw that top up deposit of £240 that I made am I right in saying that I have therefore not subscribed to a cash ISA this year and can then open up an instant access cash ISA to save this year's allowance in?

Your thoughts would be appreciated.

innovate

Not sure you can, and most probably wouldn't want to, withdraw your £240.

I have a feeling you can only withdraw the entire balance, which closes the entire ISA. What's more, a withdrawal will probably cost you 120 days interest (and I don't know on exactly what amount they would calculate that interest - - could be your old and new money, making the whole situation even worse, or could be just on the £240, if you are allowed a partial withdrawal, which wouldn't be too bad).

Check your T&Cs.

Annoying situation to be in but I am afraid, you have only yourself to blame for not double-checking with the T&Cs. Fixed-term ISAs often only let you make one or two additional payments, and/or limit the timescales for those additional payments.

AirlieBird

ReallyBigMisterBig wrote: »

However if I withdraw that top up deposit of £240 that I made am I right in saying that I have therefore not subscribed to a cash ISA this year and can then open up an instant access cash ISA to save this year's allowance in?

Your thoughts would be appreciated.

Unfortunately not. If you withdraw it will still be counted as your ISA for this year. If your fixed ISA only contained money from this year's allowance there would be a way around it, but as it contains previous years money, there is no way around your problem.

Unfortunately, you've fallen foul of a common problem with fixed rate ISAs and I am amazed that HMRC have not done something about this. I am also surprised it is not something Martin has picked up on to warn against, or campaign for the problem to be resolved.

innovate

AirlieBird wrote: »

Unfortunately, you've fallen foul of a common problem with fixed rate ISAs and I am amazed that HMRC have not done something about this. I am also surprised it is not something Martin has picked up on to warn against, or campaign for the problem to be resolved.

What should the HMRC do about it? What would Martin campaign about?

People need to read the T&Cs, or at least the key information. I can't find the page for last year's ISA on the quick now, but I remember it looked VERY similar to the Major 2 year fixed ISA, and on there it is spelt out very clearly what the rules are.

psychic_teabag

Probably too late now, but can you get the deposit back under any kind of cooling-off period ? I suspect not, since it was a deposit rather than opening a new account.

if it's any consolation, you can probably do better by saving into a regular saver account over the next year, building up a lump sum in time for the next ISA year.
See also
https://forums.moneysavingexpert.com/discussion/608697
http://www.moneysavingexpert.com/savings/best-regular-savings-accounts

Assuming basic-rate tax, a taxable reg. saver at 4% doesn't quite beat the 3.3% that Santander are offering on their instant-access cash ISAs, but comes close. The Monmouthshire BS one is particularly flexible over deposits and withdrawals, though doesn't pay the highest rate.

AirlieBird

innovate wrote: »

What should the HMRC do about it? What would Martin campaign about?

There are two things that HMRC could do:

• on application make it a requirement that savers are notified very clearly that if they do not use their full allowance before the fixed ISA closes they will lose their unused allowance and that savers must acknowledge this message, or
• prohibt ISA managers from preventing savers using their full ISA allowance, either by preventing these restrictions on deposits (as they have done with withdrawals) or by making it a requirement that ISA managers must offer another account in which savers can use the remainder of their allowance.

Martin is very keen that people utilise their full ISA allowance, so it follows to me that he would frown upon ISA managers that prevent full utilisation of the allowance and in the first instance warn people in his articles, mailing shot etc, about the pitfalls of fixed rate ISAs and the potential of not being able to use your full ISA allowance, and in the second instance campaign along the lines of my second bullet above.