Tell us you cash ISA questions

dantaden

Thank you @masonic for pointing me to the link.
Also if you could kindly explain the meaning of the following text (with some simple math) from that guidance:

Where a withdrawal is made, any subsequent subscriptions in the same tax year that would otherwise count towards the subscription limit will do so only to the to the extent that previously withdrawn amounts have been fully replaced.

masonic

dantaden said:

Thank you @masonic for pointing me to the link.
Also if you could kindly explain the meaning of the following text (with some simple math) from that guidance:

Where a withdrawal is made, any subsequent subscriptions in the same tax year that would otherwise count towards the subscription limit will do so only to the to the extent that previously withdrawn amounts have been fully replaced.

It just means, for example, if you paid in £15,000 at the start of a tax year, then flexibly withdraw £10,000, then pay in £11,000, you've used a total of £16,000 of your allowance.

AntiqueMan

I wondered whether it would be possible for MSE to have a cash Fixed Rate ISA - early termination penalty calculator on your web site.  The reason why I think this would be useful as it would allow you to check the penalty amount, without having to phone the ISA provider - as I assume that to calculate the penalty you may need to work out accrued interest v's penalty interest and the difference between the 2 represents whether your original fund has grown or shrunk.  The calculator would also show you what you would have earned if the cash ISA was retained until it maturity date.

Xarrie

I have £20,000 in a 1 year cash fixed rate ISA that I opened in June 2022. The interest rate is 2% and the penalty for early withdrawal is 60 days interest. I'm struggling to do the maths on whether it's worth the loss of interest to gain the higher rates that seem to now be available. 

eskbanker

There have been quite a lot of recent threads about how to calculate the financial benefit of terminating fixed rate ISAs early in order to transfer to better-paying accounts, so perhaps there is an argument that an MSE calculator may help, but for now just read through threads such as https://forums.moneysavingexpert.com/discussion/6401118/what-is-the-maths-for-ditching-fixed-and-paying-penalty/p1

The easy answer is that it's generally worth doing if there's a decent gap between old and new rates - the bigger the gap the quicker the payback, so much will depend on whether you aim to break even before the end of the original term or if doing so during the revised term is acceptable, but for the latter you need to make some assumptions about the rate you would have renewed at if you'd let the original product run to maturity.

There are too many variables involved to simplify it down to something really easy though, such as considering how far through the term the current product is - shifting too close to the end leaves insufficient time to recoup the penalty charge but conversely shifting too early risks losing capital, which many have a psychological problem with....

masonic

Xarrie said:

I have £20,000 in a 1 year cash fixed rate ISA that I opened in June 2022. The interest rate is 2% and the penalty for early withdrawal is 60 days interest. I'm struggling to do the maths on whether it's worth the loss of interest to gain the higher rates that seem to now be available. 

60 days at 2% is 2% / 365 * 60 = 0.33% or £65.75 of your £20k balance. You'd therefore need an annual rate of 2.66% (2% + 0.33% / 6/12) to break even over 6 months. If you think rates are going to continue to rise, then it may not be worth it even if you can break even, however, if you think rates are going to fall then it might be worth it even if you make a loss over the original 1 year term. Given there are many 1 year fixed ISAs in excess of your breakeven rate, it would seem like a no brainer and could just be a matter of timing based on where you think rates are heading.

Mobtr

I’m new to cash ISA’s but the way interest rates are heading me & my partner will probably be liable for tax this year. We’re looking at doing an ISA each, maybe fixing for 2 years. Current savings with ybs & they have a 4.1% 2 year fix that looks ok. Am I better waiting until ybs increase their rates on 09/12 in case they bring out something better or is that not how ISA’s work? Any advice will help, thanks 

refluxer

Mobtr said:

I’m new to cash ISA’s but the way interest rates are heading me & my partner will probably be liable for tax this year. We’re looking at doing an ISA each, maybe fixing for 2 years. Current savings with ybs & they have a 4.1% 2 year fix that looks ok. Am I better waiting until ybs increase their rates on 09/12 in case they bring out something better or is that not how ISA’s work? Any advice will help, thanks 

Fixed rate bonds and ISAs appear to have peaked recently and, after a year of steadily increasing rates, some banks have actually lowered their rates on these types of accounts in the last week or so. Whether you fix now or hold off a bit longer though - it's a gamble either way.

4.1% for 2 years isn't bad (especially if it's an easy option for you), however the current top 5 are all paying between 4.2 and 4.4% - see the top 2-Year Fixed Rate Cash ISA table here.

Xarrie

masonic said:

Xarrie said:

I have £20,000 in a 1 year cash fixed rate ISA that I opened in June 2022. The interest rate is 2% and the penalty for early withdrawal is 60 days interest. I'm struggling to do the maths on whether it's worth the loss of interest to gain the higher rates that seem to now be available. 

60 days at 2% is 2% / 365 * 60 = 0.33% or £65.75 of your £20k balance. You'd therefore need an annual rate of 2.66% (2% + 0.33% / 6/12) to break even over 6 months. If you think rates are going to continue to rise, then it may not be worth it even if you can break even, however, if you think rates are going to fall then it might be worth it even if you make a loss over the original 1 year term. Given there are many 1 year fixed ISAs in excess of your breakeven rate, it would seem like a no brainer and could just be a matter of timing based on where you think rates are heading.

Thanks, that's explained it really clearly - much appreciate you taking the time to set out the figures for me!

Trytobepositive

Hi all, quick question and I’m hoping this is the right forum. 

If my husband and I have each reinvested maturing fixed term cash ISAs into new fixed term cash ISAs with the same provider, can we each open new cash ISAs with a different provider this tax year? 

I think the answer is yes but I don’t want to start the process and then find out we have done the wrong thing.

Thank you in advance.