Cash ISA Error? - Ford Money

JAM_91

Hi guys, 
I've just joined for forum and this is my first post so I hope it's in the correct place. 
So, I managed to amount up to £30,910.10 in saving over the last 5 years which up until recently I had in a Cash ISA with TSB. However, after noticing the incredibly low interest rate on my ISA account with TSB (0.15%) I decided to move my saving over to Ford Money who were offering a much improved interest of 1.27%. Therefore, I transferred all my saving from my TSB account over to the Ford Money ISA on 25/02/2020 expecting to have 1.27% interest paid on the full amount in April. However, this wasn't the case and I received no interest payment from Ford Money at all... I contacted them to enquire why and they told me that there was no interest paid during the 2019/2020 tax year as I had selected for annual interest. Therefore, the next interest payment will be on 17 March 2021 and this will count towards the 2020/2021 tax year.

Is this correct? I thought if fund were transferred over from an existing ISA account that the full years interest would be paid by the new savings provider? If this isn't the case then does the interest year get reset once you open up a new account with another provider? If so have I essentially done myself out of an entire years worth of interest?

Thank you for any help and/or advice in advance. 

eskbanker

JAM_91 said:

Is this correct? I thought if fund were transferred over from an existing ISA account that the full years interest would be paid by the new savings provider? If this isn't the case then does the interest year get reset once you open up a new account with another provider? If so have I essentially done myself out of an entire years worth of interest?

Interest is only ever paid according to the time money is in the account, so if you transfer ISA money to Ford in February 2020 that will only start accruing interest with Ford from that date onwards, and will have earned the full 1.27% a year later, not two months later.  TSB will have added pro rata interest up to the date of transfer though, so check your paperwork.

JAM_91

eskbanker said:

JAM_91 said:

Is this correct? I thought if fund were transferred over from an existing ISA account that the full years interest would be paid by the new savings provider? If this isn't the case then does the interest year get reset once you open up a new account with another provider? If so have I essentially done myself out of an entire years worth of interest?

Interest is only ever paid according to the time money is in the account, so if you transfer ISA money to Ford in February 2020 that will only start accruing interest with Ford from that date onwards, and will have earned the full 1.27% a year later, not two months later.  TSB will have added pro rata interest up to the date of transfer though, so check your paperwork.

Ah, I see... Makes sense.
Thank you for your help. 
Seems a bit pointless now that Ford have dropped the interest rate on my ISA to 0.65%. Although, still more than what I was previously getting with TSB. 

Am I correct in thinking that I should receive interest at 1.27% up until the date they lowered it and then at 0.65% thereafter or is interest calculated on the rate applied at the end of the tax year? 

eskbanker

JAM_91 said:

Am I correct in thinking that I should receive interest at 1.27% up until the date they lowered it and then at 0.65% thereafter or is interest calculated on the rate applied at the end of the tax year? 

The former....

bowlhead99

JAM_91 said:

eskbanker said:

JAM_91 said:

Is this correct? I thought if fund were transferred over from an existing ISA account that the full years interest would be paid by the new savings provider? If this isn't the case then does the interest year get reset once you open up a new account with another provider? If so have I essentially done myself out of an entire years worth of interest?

Interest is only ever paid according to the time money is in the account, so if you transfer ISA money to Ford in February 2020 that will only start accruing interest with Ford from that date onwards, and will have earned the full 1.27% a year later, not two months later.  TSB will have added pro rata interest up to the date of transfer though, so check your paperwork.

Ah, I see... Makes sense.
Thank you for your help. 
Seems a bit pointless now that Ford have dropped the interest rate on my ISA to 0.65%. Although, still more than what I was previously getting with TSB. 

Am I correct in thinking that I should receive interest at 1.27% up until the date they lowered it and then at 0.65% thereafter or is interest calculated on the rate applied at the end of the tax year? 

When you left TSB, they will have calculated and included any outstanding interest since their last interest payment in the amount they sent to Ford.  Then the money Ford receive will start to earn interest and the interest earned at Ford will be paid out whenever Ford usually pay out interest. If you leave Ford for somewhere else, they'll calculate any unpaid interest and credit it to you on your way out.

They will calculate it on a daily basis, based on the amount in the account and the interest rate relevant to that day. So you will have started to earn interest at a rate of 1.27% a year, but after their interest cut you will now be earning interest at 0.65% a year, but you won't lose any interest that had already been building up at the old rate - it will be included in what you're eventually paid, when you reach the payment date.

Whether interest is paid in the 2019/20 or 2020/21 tax year is somewhat irrelevant as the interest you receive is not taxable anyway, because it's being earned in an ISA, and the tax man does not care about interest you earn in an ISA (that's the point of ISAs).

JAM_91

bowlhead99 said:

JAM_91 said:

eskbanker said:

JAM_91 said:

Is this correct? I thought if fund were transferred over from an existing ISA account that the full years interest would be paid by the new savings provider? If this isn't the case then does the interest year get reset once you open up a new account with another provider? If so have I essentially done myself out of an entire years worth of interest?

Interest is only ever paid according to the time money is in the account, so if you transfer ISA money to Ford in February 2020 that will only start accruing interest with Ford from that date onwards, and will have earned the full 1.27% a year later, not two months later.  TSB will have added pro rata interest up to the date of transfer though, so check your paperwork.

Ah, I see... Makes sense.
Thank you for your help. 
Seems a bit pointless now that Ford have dropped the interest rate on my ISA to 0.65%. Although, still more than what I was previously getting with TSB. 

Am I correct in thinking that I should receive interest at 1.27% up until the date they lowered it and then at 0.65% thereafter or is interest calculated on the rate applied at the end of the tax year? 

When you left TSB, they will have calculated and included any outstanding interest since their last interest payment in the amount they sent to Ford.  Then the money Ford receive will start to earn interest and the interest earned at Ford will be paid out whenever Ford usually pay out interest. If you leave Ford for somewhere else, they'll calculate any unpaid interest and credit it to you on your way out.

They will calculate it on a daily basis, based on the amount in the account and the interest rate relevant to that day. So you will have started to earn interest at a rate of 1.27% a year, but after their interest cut you will now be earning interest at 0.65% a year, but you won't lose any interest that had already been building up at the old rate - it will be included in what you're eventually paid, when you reach the payment date.

Whether interest is paid in the 2019/20 or 2020/21 tax year is somewhat irrelevant as the interest you receive is not taxable anyway, because it's being earned in an ISA, and the tax man does not care about interest you earn in an ISA (that's the point of ISAs).

Fantastic information, you've answered all the questions I had and I understand more clearly now. 
Thank you so much for taking the time out to help me bowlhead, I appreciate it. 

Albermarle

Seems a bit pointless now that Ford have dropped the interest rate on my ISA to 0.65%. 

Hindsight is a wonderful thing but it is usually better to have fixed rate accounts, if you do not need to access the money for a year or more.