APS ISA question. 27 May 2022 at 6:41PM in ISAs & tax-free savings 11 replies 198 views

Rusty190

I'm not a natural financial whizz kid so apologies if this sounds like a ridiculous question.
I've recently inherited 3 ISAs with 2 different banks.
After much searching, I have decided to open an APS ISA account, in the first instance, then transfer the monies from the 3 original accounts, into the new APS ISA account.
In what order do I do this?
Do I open new account first, then transfer money in (one of the banks concerned will just pay the balance to me by cheque - they don't transfer it any other way) or, shall I claim the ISA money first and close the accounts then open up the new ISA?

Rusty190

Or, does it not matter?

Albermarle

If you want to transfer ISA money and you want it to keep its ISA status, you must NOT withdraw the money from the ISA yourself. 
You instruct the ISA provider where you want to transfer into, to transfer the other ISA's into them. There is no need to contact the ISA providers you are transferring away from.

masonic

As these are ISAs from a deceased spouse or civil partner, they cannot be transferred in the normal way. You would need to open an ISA in your name and claim the APS. Once you have done this and have confirmation that the additional allowance has been added to your ISA, you can move the sums across. They will be treated as new ISA subscriptions, coming out of the additional allowance you have been granted. It would be best to leave the money in place until you are all set up with your new ISA and APS is registered. There can sometimes be difficulties with the process as it is not commonly used and may be misunderstood by some customer service agents, so you will want to be certain the right steps have been taken.

Marmaduke123

I'm in the same situation, just waiting for probate to be able to access my late husband's ISA. It's worth noting that not many ISA providers will accept APS money,  and they tend to offer poor interest rates. I've been advised that there is nothing to stop me moving the money to a better paying ISA when the APS ISA has been fully funded.

Masonic, could you expand on "claim the APS"? This is the part of the process which isn't really clear to me. Thanks.

masonic

Marmaduke123 said:

I'm in the same situation, just waiting for probate to be able to access my late husband's ISA. It's worth noting that not many ISA providers will accept APS money,  and they tend to offer poor interest rates. I've been advised that there is nothing to stop me moving the money to a better paying ISA when the APS ISA has been fully funded.

Masonic, could you expand on "claim the APS"? This is the part of the process which isn't really clear to me. Thanks.

The process varies by provider, but there will invariably be an application form, sometimes a special version of an ISA application form. It is usually easiest to use the APS with the same provider if possible, and then transfer to your preferred ISA. If you can't or don't want to do that, or you want to combine APS from more than one provider, you need to complete an APS transfer to move the APS to the right place. You can do this once, and only if you have not yet started using the APS to be moved. Providers vary in that some require APS to be used in one go, whereas others allow you to fund in instalments. Some require you to use one of their normal ISAs to receive the APS, while others have special APS ISA accounts.

Rusty190

Thank you @masonic. That was my understanding, thankfully.

I should have said in the OP, that while I too have my own ISAs with both banks concerned,unfortunately,  neither bank accepts APS payments.

I had thought it would be a simple "move this money from the late Mr Rusty's ISA to mine" but no joy.

Anyone have any idea why banks are reluctant to deal with APS ISAs?

I agree @Marmaduke123, finding a provider who accepts APS has not been simple and yes, the interest rates paid are woeful - far less than a "normal" cash ISA, -  but I just want to get it in one place for now and then will consider what to do with it going forward.

masonic

I imagine providers don't want to deal with APS for the same reasons they have not launched Lifetime ISAs. It requires additional overheads and training, where their business model is to be competitive on rate by keeping overheads at a minimum.

Albermarle

OP,
Are you aware that up to a point, savings interest is tax free nowadays, so for many people cash ISA's are redundant.
Even if you paid some tax, the interest rate on non ISA savings is usually better than ISA's, and sounds like will be a lot better than an APS ISA account.
A 20% taxpayer can earn up to £1000 interest tax fee each tax year. A 40% taxpayer - £500 and a non taxpayer more.

However I do not know whether you could just withdraw the money from these inherited ISA's ( and deposit them in a higher interest earning non ISA savings account) as they may have some special status. Hopefully someone else can answer that.

In any case even if you keep their ISA status, it is worth being aware for the future of the potential for earning higher interest elsewhere.

masonic

Albermarle said:

However I do not know whether you could just withdraw the money from these inherited ISA's ( and deposit them in a higher interest earning non ISA savings account) as they may have some special status. Hopefully someone else can answer that.

In any case even if you keep their ISA status, it is worth being aware for the future of the potential for earning higher interest elsewhere.

Generally, APS can be used up to 3 years from the date of the death, subject to the provider's own restrictions, so some additional interest could be earned in the short term while not losing the ISA status. Just as flexible ISAs would allow for this, albeit over a shorter timeframe.

APS is generally more valuable for S&S ISAs than for cash ISAs, and there is nothing to stop someone moving their APS to a S&S ISA.

Rusty190

@Albermarle :Thank you. 
Yes, I am aware of the £1000 tax free interest allowance.
I have savings in my own name in addition to these ISAs.
I am very keen not to stray into the realms of having to fill in tax forms for HMRC hence, the desire to keep things tax free where possible.
I appreciate that this may not be the best use of savings from a growth/inflation  perspective but having spent the last several weeks/months dealing with all the "sadmin" that's required following bereavement, I felt that, for me, this would help simplify matters in the short term and give me a bit of respite until I decide what to do long term.