Any Advantage in Transferring an ISA?

booler

I have a couple of ISAs about to mature. Is there any advantage in transferring them to another ISA versus drawing the money out and just opening another ISA?

I am asking the question because I am not sure if I have time to do the transfer.

jimjames

Depends if you have £50,000 in it or £500.

If it's more than the annual allowance then a transfer is the only way you can maintain the ISA tax free status of that money.

If it's £500 and you won't be putting more than £14500 into an ISA this year then withdrawing and paying in again would be fine. However if you do have £500 or even £5000 then an ISA isn't the place to get the best interest rates.

Edit - what's the issue with time? I can't believe it takes any different to open or transfer an ISA.

booler

I don't think I was understanding this. The two ISAs are both for three year periods. They mature at the end of the month. The total in them will be around £12.5k. Can I just withdraw them then open another without any penalty?

(Not very good at this, which is why I am asking.)

Lokolo

booler wrote: »

I don't think I was understanding this. The two ISAs are both for three year periods. They mature at the end of the month. The total in them will be around £12.5k. Can I just withdraw them then open another without any penalty?

(Not very good at this, which is why I am asking.)

Yes you can do this but you will use this years allowance.

So out of the £15,240, you would only have approx £2750 left to put into an ISA until next tax year.

If you transfer it the proper ISA allowance way, you won't use any allowance and will be able to deposit £15,240 into ISAs until next tax year.

Steve_xx

booler wrote: »

I don't think I was understanding this. The two ISAs are both for three year periods. They mature at the end of the month. The total in them will be around £12.5k. Can I just withdraw them then open another without any penalty?

(Not very good at this, which is why I am asking.)

No. If you want to keep these maturing ISA's from losing their tax-free wrapper you will need to transfer both of them to another provider.


So you would choose a new provider and then give the new provider the details of the two existing ISA's and their mature dates. The new provider will then orchestrate the transfer from the existing provider to them, once they have matured. That way you keep the two ISA's with their tax free wrapper on. By the way, the new provider will need to be one that accepts "transfers in" of existing ISA's, not all providers do.


If you withdraw the funds from the existing provider yourself, then you immediately lose the tax-free wrapper.

bowlhead99

When they "mature" it is unlikely that the ISA provider will just send them back to your own, non ISA-wrapped, bank account without asking you.

Either their standard approach will be to roll it over into another fixed rate ISA product or convert it into one of their instant-access ISA products. You should ask them what they will do with it, if it doesn't already say in the documentation you have.

Then if you want to transfer it to another ISA you can, just don't put it in a new fixed deal with the same provider. Leave it somewhere instant-access with your current provider; then you can give the new ISA provider a transfer form and they will go and get your money without it ever leaving ISA status.

If you instead "withdraw" the money back to your own bank account and then open a new account, then the £12500 you put into the new ISA account from your regular bank account will count as a new subscription in this tax year, rather than a transfer, which may be annoying because maximum new subscriptions is just over £15k per tax year and you might run out of space.

If you are not the sort of person who is able to max out their annual ISA limit anyway: for £12.5k you would likely get a better rate of return in a current account (e.g. Santander 123) than an ISA.

booler

I have been looking around and I think I will just move them to the Bank of India fixed term (1000 day) ISA, which yields 2.25% per annum. Thanks for your contributions guys.

Steve_xx

booler wrote: »

I have been looking around and I think I will just move them to the Bank of India fixed term (1000 day) ISA, which yields 2.25% per annum. Thanks for your contributions guys.

I don't think that I would at this stage go for such a long stretch of 3 years for a return of 2.25%. Have a look at the Punjab Bank variable rate ISA which offers instant access, though only at 2% at least your money isn't tied up. It looks like they accept transfers-in so you should be ok there.

http://www.pnbint.com/cash_isa.aspx

alanq

bowlhead99 wrote: »

Either their standard approach will be to roll it over into another fixed rate ISA product or convert it into one of their instant-access ISA products. You should ask them what they will do with it, if it doesn't already say in the documentation you have.

Good advice. If the default action is to roll the maturing ISA into another fixed term ISA it is possible that there will be a penalty to pay if you do nothing before withdrawing after the maturity date (though some financial institutions who roll over such accounts allow a few weeks penalty-free access).

booler

I did look at the Punjab bank but you can only do this through a branch and they have no branches in Scotland, where I am located.

Steve_xx

booler wrote: »

I did look at the Punjab bank but you can only do this through a branch and they have no branches in Scotland, where I am located.

I don't think that's the case. Here's a link to their on-line forms for the ISA:

http://www.pnbint.com/forms/Cash%20ISA%20Application%20Form.pdf