Moving money out of ISA

CashMoney

Hi, I have recently switched my ISA over to a provider offering a better rate but I have just seen on their website that they have now reduced the rate on it so I am waiting for the dreaded email/letter telling me this. I wanted to query something.....If they do drop it and I decide to move all of the money (60k, 3 years worth of maxed ISAs) into my credit union account which I recently opened, will I get any punishment for this? Also what happens in the future if say ISA rates increase dramatically (yes I know, but we can all dream!), would I be able to open an ISA and move the full amount over in one go or do I "start again" from whatever the allowance is that year i.e. 20k and build up every year again?

Thanks

colsten

If you have an instant access ISA, you can withdraw as much as you like, any time you like, with no penalties. Even if you have a fixed term ISA, you can close it when you like, but that might come with an interest penalty - see your T&Cs. 

You can move your ISA funds to wherever you like, credit union or other account(s).  I would be very surprised if any credit union has more favourable interest rates as the best bank, but I am sure you have investigated this. Please let us know which CU offers more than the best bank savings rate - the MSE Forum works best when people share information about best deals.

The minute you take money out of your ISA, that money has lost its tax wrapper. Your maximum annual ISA allowance is the legal maximum that applies to everybody (£20k at present) and will not be altered by the fact that you had a previous ISA. However, you might want to read up about Flexible ISAs, check whether yours is one of them, and if so, decide whether you might benefit from exercising the flexibility.

jscol

I think to get useful answers to this you'll have to give a bit more info. Your age, approx salary, rate of interest in credit union account, what rate of tax you pay, your pension provision, other savings, do you have mortgage etc.
Only then can someone give you robust advice. 
Certainly if you take money out an ISA that's it unwrapped and you can't just stick it back in at a later date. 

eskbanker

CashMoney said:

If they do drop it and I decide to move all of the money (60k, 3 years worth of maxed ISAs) into my credit union account which I recently opened, will I get any punishment for this?

The sentencing tariff for this offence is to have all your fingernails pulled out while chained in front of a TV screen playing Piers Morgan, David Icke and Donald Trump in rotation on a loop.  Or to put it another way, no.

CashMoney said:

Also what happens in the future if say ISA rates increase dramatically (yes I know, but we can all dream!), would I be able to open an ISA and move the full amount over in one go or do I "start again" from whatever the allowance is that year i.e. 20k and build up every year again?

If you withdraw from a flexible ISA, you can return the money within the same tax year, but in any other circumstances you have to start again from scratch....

NorthernJoe

jscol said:

Certainly if you take money out an ISA that's it unwrapped and you can't just stick it back in at a later date. 

Depends if it's a flexible ISA or not 

CashMoney

HI it's not a flexible ISA so I'll have to start again  . 
@colsten - I recently joined Commsave credit union as they gave out 2.25% dividends in Feb this year, 2.5% last year and 2% the previous 2 years before that.
@jscol - I'm 33, I earn around 20k a year before tax and I'm a basic rate tax payer, no mortgage (own property outright) and I pay into a workplace pension.
So a little background into the original query....I switched to the Virgin Money Double Take Cash ISA which offered 1.31% at the time. Their website is now showing the rate as 1.01% so I'm guessing soon they'll notify me that my rate is dropping. I know that I can withdraw money from it once and then again a second time which will close the account completely.

ColdIron

CashMoney said:

I switched to the Virgin Money Double Take Cash ISA which offered 1.31% at the time. Their website is now showing the rate as 1.01% so I'm guessing soon they'll notify me that my rate is dropping.

They may not. The 1.01% rate is for the latest Issue 16. Virgin have been quite good in often maintaining the rate on earlier issues. I have the Double Take E-ISA Issue 6 which continues to pay the 1.47% that I opened it with. No guarantees of course

CashMoney

@ColdIron - Hopefully it will be the same case for me then.
I don't know whether it's worth taking the money out of ISA wrapper. I'm a basic rate taxpayer so ISA's dont really do me any favours.

badger09

@CashMoney
Are you sure you can move £60k into your credit union? I've had a (very) quick look at the website and can see only references to various regular saver type accounts. Which account are you hoping to use?

colsten

CashMoney said:

@colsten - I recently joined Commsave credit union as they gave out 2.25% dividends in Feb this year, 2.5% last year and 2% the previous 2 years before that.

Past performance is not a reliable indicator of future performance. Good luck though, anyway.

CashMoney said:

I'm a basic rate taxpayer so ISA's dont really do me any favours.

If you will always be a BR payer, if interest rates stay low, if you don't substantially add to your £60k ISA fund, that may well be true for cash ISAs. 

CashMoney

@badger09 - Yes I have the regular saver which can take out anywhere between £2 and £250 a week from your salary and you can also deposit one off payments as and when you wish to. I have tried this from my current account twice now and gone through with no hassle. It is covered upto 85k by FSCS and regulated by FCA. It currently has just over 24k members and almost £60 million in total savings.