£4000 to Save - ISA or Savings Account?

Aegis

Moncs wrote: »

Transfer out penalty? If you mean does it cost anything to withdraw money then no, there is no charge.

I did not think ISA's had set rates, I thought it depended on which market the money was invested in??

A transfer penalty would be in the form of lost interest. Some of the terms and conditions can include a fairly weighty transfer out fee for a cash ISA. Not exactly sure how that works for S&S ISAs.

As for the second comment, the ISA tag is just a wrapper meaning "special tax rules". The ISA can be either cash or stocks and shares (or a combination of the two for maxi ISAs), of which cash ISAs will have interest rates determined by the bank and sometimes the BoE base interest rate, while S&S ISAs depend entirely on which stocks and shares you invest your money in, with the ISA provider usually getting some money from commission given out by the fund managers.

isofa

Make sure the cash ISA you choose is instant access (the majority are), getting fixed into a 5 year term ISA, is a very bad idea for your investment, as rates change, you need to be able to move money around. Also make sure they allow transfers out should you need to move the money at a later stage to another provider, not loosing the ISA status.

Remember the rate on an ISA is gross and tax free, so if you are a basic rate tax payer and put 3K into a 6.3% ISA, you'd have to get an a normal account paying nearly 7.9% gross to give the same 6.3% net! And you'll never find that for a lump sum at the moment!