Cash ISA Query

Keith601

Hi There

I have some old Cash ISA's from previous years, these ISA's have had £3.5%, but on maturity will soon drop to low interest rates. (ie: something like 1%. I am looking to open a new 2013/14 ISA with The Coventry Building Society, (using the full £5760 allowance) at 2.6% interest. Question is:- Will it be OK to withdraw £5760 from my old ISA'S (once the interest has been paid) to fund my new ISA with The Coventry BS and transfer the remainder of these old ISA'S into the Cheshire BS (who allow Transfers) at 2.3% interest. Thus keeping to the Tax free envelope.

Advice would be appreciated.

Thanks

Keith

lisyloo

No, you should avoid this.
It would be far better to transfer all your old ISAs instead of withdrawing and keep the £5760 allowance free in case you have the money available to deposit at any time in the next 12 months.

It's pretty easy to transfer.
You open a new ISA and fill out a very simple transfer form and give it to the new provider.
It's a simple process but you msut transfer and not withdraw.

If you do what you are suggesting then you needlessly us up your 20013/2014 allwoance.
Even if you don't think you will need this, there is always the chance of a windfall.

PennySaving

Thank you for asking this question and the reply. I have been pondering this for a few days in regard to my ISA.

Keith601

Thanks for your reply. However I should point out that I am retired, and the prospect of saving £5,760 (new Money) within the next 12 months is rather slim. That is why I thought that by taking the £5,760 from my old ISA,s (which as stated would only attract a very low interest rate) and using that money to fully fund the 2013/14 ISA allowance in one go, therefore utilizing a full 12 month interest rate of 2.6%.

Regards

Keith

Yorkie1

Does Coventry permit transfers in? If so, just ask them to transfer the whole lot there - no need to add more money unless you choose to during the year, but the whole lot gets the 2.6%.

If Coventry don't permit transfers in, you can do as you suggest but it really isn't great practice in case you want to put any money in interest free saving next year.

Keith601

Hi There

The 2013/14 ISA interest rate for Coventry BS is 2.6% but they do not allow transfers in. The Cheshire BS interest rate is 2.3% and they do allow transfers in.

Hence my thoughts on fully funding in one go The Coventry BS at 2.6% and the remainder transferred to Cheshire BS at 2.3%.

It should be borne in mind that as with all Interest rates, they only last a few months then they fall.

But if you need to maximize the best interest available, I feel that taking funding from a low interest rate account and using those funds to take advantage of the highest rates available over a full 12 months.

Regards

Keith

Crabman

Hi folks,

This thread has been moved to the ISAs sub-board.

lisyloo

But if you need to maximize the best interest available, I feel that taking funding from a low interest rate account and using those funds to take advantage of the highest rates available over a full 12 months.

Sorry keith I'm not getting your point here.
Why would you get more interest if you withdraw/deposit rather than transfer?
Given the same timescales, both should be mathematically identical.
Am I missing something?

innovate

lisyloo wrote: »

Sorry keith I'm not getting your point here.
Why would you get more interest if you withdraw/deposit rather than transfer?
Given the same timescales, both should be mathematically identical.
Am I missing something?

The point is that the 2.6% ISA does not allow transfers in.

lisyloo

The point is that the 2.6% ISA does not allow transfers in.

Thanks, got it now.
I think we are talking £17 for the 0.3% on £5760.
You have to trade off that extra £17 over losing that ISA allownce.
I think I'd go for the lower rate and keep my options open, but it's a tricky one.

I find it a useful technique in such decisions to work out how much we are talking about.

Keith601

I agree it is a tricky one, but if you have not got £5760 new money that you can invest in the top ISA for 12 Months in one go, instead of drip feeding, I just think it could be an option to consider.