Is it worth transferring a Cash ISA to another ISA

Huggy_Bear

I've got a couple of Cash ISA accounts from previous years subscriptions. They are not on good interest rates, so is it worth transferring these to another Cash ISA to keep the ISA thing or shall I just open a regular savings account which have slightly better interest rates or does still having a Cash ISA come with other benefits I'm not aware of :undecided



I'm looking for 1 year fixed:beer:

xxdeebeexx

I have a flexible ISA that I can withdraw from and replace any withdrawals with in the same tax year.
I leave a few ££ in the account and put the bulk of the money into other savings accounts with higher interest.

Towards the end of the tax year I refill my flexible ISA and then withdraw it at the beginning of the new tax year for better interest.


I just want the option to maintain its tax free status... just in case.


It works for me



dx

xylophone

It depends on your tax position/whether you want to keep the ISA status on the basis that interest rates may one day improve/you may wish to transfer to a S&S ISA.

If you stick with the ISA look for the best rate.

https://www.thisismoney.co.uk/money/saving/article-1583864/Best-savings-rates-Isas-Cash-Isa-accounts-fixed-rate-Isas.html

Huggy_Bear

xylophone wrote: »

It depends on your tax position/whether you want to keep the ISA status on the basis that interest rates may one day improve/you may wish to transfer to a S&S ISA.

If you stick with the ISA look for the best rate.

https://www.thisismoney.co.uk/money/saving/article-1583864/Best-savings-rates-Isas-Cash-Isa-accounts-fixed-rate-Isas.html

Thank you this is the sort of thing I was thinking about:beer:

IanSt

Huggy_Bear wrote: »

I've got a couple of Cash ISA accounts from previous years subscriptions. They are not on good interest rates, so is it worth transferring these to another Cash ISA to keep the ISA thing or shall I just open a regular savings account which have slightly better interest rates or does still having a Cash ISA come with other benefits I'm not aware of :undecided

You've not said how much is in the Cash ISAs, but they are of limited (if any) use for most people given the current state of interest rates and people's usual smallish amount of cash savings.

However if interest rates do ever start to rise again then they could start to become useful for more than the few big-time savers who may otherwise have had to pay some tax on their high amounts of interest, but given that you can currently put up to £20,000 per year into an ISA, most people I'd assume could put their entire savings into an ISA in one go should interest rates on savings suddenly spike upwards.

There is of course always the chance that a future government changes the rules on ISAs, but who knows what those changes would be and so I wouldn't base any decisions on that.

RG2015

It is also possible that the personal tax allowance may change in the future making savings interest liable for tax at your usual rate. This would potentially make an accumulated ISA allowance very useful.

Huggy_Bear

IanSt wrote: »

You've not said how much is in the Cash ISAs, but they are of limited (if any) use for most people given the current state of interest rates and people's usual smallish amount of cash savings.

.

£16k in 3 different accounts

Razoo

Huggy_Bear wrote: »

I've got a couple of Cash ISA accounts from previous years subscriptions. They are not on good interest rates...

Are any?

...so is it worth transferring these to another Cash ISA to keep the ISA thing or shall I just open a regular savings account which have slightly better interest rates or does still having a Cash ISA come with other benefits I'm not aware of :undecided

I keep my cash ISAs topped up annually, but since the introduction of the Personal Savings Allowance (PSA) in April 2016, I tend to wait until near the end of the tax year. I leave my money in ordinary savings accounts until then, as the interest rates are higher, as you have mentioned. However, once the £1,000 PSA has been used up, there's not much to choose between ISA interest and taxed savings account interest for the basic rate taxpayer.

The main attraction of ISAs is supposed to be that no tax is due on the interest earned, so theoretically the saver would see a substantially higher return from an ISA compared with the return from an ordinary (taxed) savings account. However, because of the disparity between ISA interest rates and ordinary savings account interest rates, the ISA saver is effectively short-changed by the banks and building societies.

A few weeks ago I was looking for a new fixed rate ISA to transfer a matured ISA into. The best ISA interest rate I could find was 1.62% fixed for 1 year. The best savings account interest rate I could find was 2.01% fixed for 1 year.

The difference between the two interest rates is virtually equivalent to the 20% tax that a basic rate taxpayer would have to pay on the savings account interest, once the £1,000 PSA has been used up.

Based on a deposit of £20K:

£20K x 1.62% = £324 interest (ISA - no tax due).

£20K x 2.01% = £402 interest (Savings Account - potentially taxable at 20% for a basic rate taxpayer).

The savings account yields £78 more interest than the ISA. However, if the savings account interest is subject to 20% tax (£80.40), that reduces the savings account interest to £321.60; just £2.40 less than the untaxed ISA interest.

If there was parity between ISA and savings account interest rates, the ISA would win easily, but there isn't because the banks and building societies grab the benefit for themselves by depressing ISA interest rates.

I don't understand why there is this huge disparity between ISA interest rates and ordinary savings account interest rates, but assume there must be a cartel operating within the savings industry.

I asked the bank offering the 2.01% fixed rate savings account why they didn't also offer a 2.01% fixed rate ISA. The advisor didn't know!
_____
Razoo