ISA advice

wyutani

I am completely confused by ISA rules...basically my current 1 yr Fixed rate ISA is such an abysmal rate that since the rates have shot up it is worth transferring to a new provider and take the penalty fees. The ISA I am transferring from is mainly money from previous years plus some new money from this year.  Can I put more money into the new Fixed rate Cash ISA I have opened up to the total limit for this year? 

Smithers37

If you’ve subscribed to your 1 year fix this financial year (any money placed since April last year) then you won’t be able to add more into a new account. However you can transfer to a new account, so if you’re current fix allows more deposits you could max it then transfer out.

as for whether it’s worth the penalty, you’d have to calculate how much interest you will earn for the fix period against how much you’ll earn on the new account with the penalty.

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

wyutani

Thanks, though I have found several sources that say transferring my full ISA (a combination of old money and some from this year) to another provider this year means I will still have the remainder of this years allowance to put in the new ISA. 

rallycurve

wyutani said:

Thanks, though I have found several sources that say transferring my full ISA (a combination of old money and some from this year) to another provider this year means I will still have the remainder of this years allowance to put in the new ISA. 

This is right. If your current fix does not allow additional deposits, transferring out (paying any penalty) is your only option to use the rest of this tax year's allowance 

Albermarle

wyutani said:

Thanks, though I have found several sources that say transferring my full ISA (a combination of old money and some from this year) to another provider this year means I will still have the remainder of this years allowance to put in the new ISA. 

That is correct.

If you spend some time reading through the ISA sub forum, you should be less confused about ISA rules, as the same questions come up again and again.
ISAs & tax-free savings — MoneySavingExpert Forum

Band7

wyutani said:

Thanks, though I have found several sources that say transferring my full ISA (a combination of old money and some from this year) to another provider this year means I will still have the remainder of this years allowance to put in the new ISA. 

This is correct. After your entire contributions for the current year have been transferred to a new ISA, you can make further contributions to that new ISA (T&CS of the new ISA allowing etc etc).

Whether paying the penalty for transferring before maturity depends on how much the penalty is, and how it compares with how much the new ISA would pay for the remainder of the existing fixed term.

Note there is a dedicated ISA MSE subforum which answers many ISA questions: https://forums.moneysavingexpert.com/categories/isas-tax-free-savings

Band7

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

wyutani

Thanks all, I am clearer now, forums are useful but along with various financial advice websites the advice seems to vary..though I am fairly sure now that you can contribute more money to a new isa if you have transferred old one into it and haven't put in 20K cash into old one this FY.   At approx. 4% APR for a 1 yr fix I think it is a good option for a risk averse HR tax payer.

Band7

wyutani said:

 I am fairly sure now that you can contribute more money to a new isa if you have transferred old one into it  

This has always been the case, obvs subject to max contribution limits and the T&Cs of your new ISA.

wyutani said:

 At approx. 4% APR for a 1 yr fix I think it is a good option for a risk averse HR tax payer.

Agreed, excellent deal, as it is the equivalent of 6.6% in a non-ISA. Even BR tax payers would need a 5% non-ISA account to match a 4% ISA.

Any reason why you don't go for the 4.25% Virgin ISA, btw? You'll need to have a current account with them to get access to it, but you don't have to use that current account if it doesn't offer you anything else of value.

Smithers37

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

Well sure, which is why I prequalified with saying personally recognising the fact that every personal circumstance is different  but the OP specifically mentioned they were looking to move because of the rates, which is why I mentioned that the rates are rarely very good.

Band7

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

Well sure, which is why I prequalified with saying personally recognising the fact that every personal circumstance is different  but the OP specifically mentioned they were looking to move because of the rates, which is why I mentioned that the rates are rarely very good.

The interest rates on ISAs have recently improved substantially, similar to what they have done on non-ISA accounts. Of course some existing ISA accounts are in the doldrums, just like with non-ISA accounts. Though even before the recent rate increases, cash ISAs were a viable option for the emergency funds of HR tax payers, and that's even more true now. In addition, cash ISAs have become viable again even for BR tax payers and/or for people who bust their PSA, either in the current tax year or in the near future. If there is any rule, it's that people should regularly assess whether there are any offerings which would suit their particular circumstances. It certainly isn't the case that cash ISAs aren't worth it as a rule.