ISA rate due to expire. Can't decide what to do with it

madmish00

I have £5500 currently in an ISA with Santander at 2.5% but that rate is due to expire on 12th March and drops to 0.5%. That balance was transferred in from previous year and I have not added to it in this tax year.

I also have a Santander 123 Current Account with around £4500 of savings in it which I had intended to pay into an ISA by the end of this tax year but there doesn't appear to be much on offer for Cash ISA's at the moment especially to transfer in.

I am trying to decide whether to just transfer my ISA balance into the 123 account so that I get 3% on the full amount. I realise that this will mean I lose the tax and am restricted to the £5760 limit per year if I decided later I want to pay it back into an ISA but as it is only one years allowance will this make all that much difference?

Or should I wait it out in the ISA at 0.5% in case some better deals come up just before 5th April?

libra10

I have just transferred an ISA to Yorkshire Building Society, at a rate of interest 2% for 18 months.

It seemed the best offer I could see at present, and the time period isn't overly long.

Good luck

kidmugsy

Look at the Leeds 5 year ISA at 3.05% p.a.: if you read the T&Cs and do the arithmetic you'll find that, for example, if you withdrew the money at 18 months you'd have earned 2.3% p.a., which beats the Yorkshire one.

I don't know whether the Leeds accepts transfers in, but if not there's an obvious solution.

libra10

It looks like transfers are accepted into the Leeds BS account.

http://www.leedsbuildingsociety.co.uk/savings/fixed-rate-isa-5-year.html

Transfers

To transfer all or part of your existing ISA from another ISA manager, simply complete the ISA Transfer Request Form and Cash ISA Application Form (if required) and we'll do the rest.

diy1950

Kidsmugsy post 3

I too am interested in this isa. I'm not too hot on maths How did you work out the interest if you withdrew/transferred after 18 months?

zagfles

diy1950 wrote: »

Kidsmugsy post 3

I too am interested in this isa. I'm not too hot on maths How did you work out the interest if you withdrew/transferred after 18 months?

1) you can withdraw 25% without penalty, so you'll get 3.05%pa interest on 25% of the investment.
2) the rest is subject to 6 months loss of interest, so you'll get interest on 12 months instead of 18, so 2/3rds the rate ie 2.033%

So that averages out at a quarter at 3.05% and 3/4 at 2.033, ie 2.287%.

And of course if you don't need the money after 18 months and there aren't rates significantly better than 3.05% then, you won't withdraw and so carry on getting 3.05% on the lot.

zagfles

Having said the above, this thread throws up an interesting point https://forums.moneysavingexpert.com/discussion/401374

The T&Cs are a bit vague, it's possible that if you withdraw more than 25%, they could apply the 180 interest penalty to the total amount withdrawn, rather than the amount withdrawn above 25%.

calypso_rhapsody

This 5 year product is not now on the Leeds website .... but i agree with zagfles that the wording (in the 2 year one) could be read to apply the penalty to the whole of the amount you withdraw if it is greater than 25%.