Cash ISA Near to FSCS Safety Limit

bigbars

Similar scenario to the original post. As I am close to the fscs limit. I will most likely next year breach it once interest is applied on my fixed rate cash isa. If the provider allows partial transfers, could I within my isa interest options, transfer the interest to one isa provider which is below the limit and make deposits in another isa provider both in the same tax year using my 2024 allowance?

dave1345

Deleted_Userlj said:

could I within my isa interest options, transfer the interest to one isa provider which is below the limit and make deposits in another isa provider both in the same tax year using my 2024 allowance?

I'm pretty sure I've done this in the past. Once money is in an ISA you can move it around within whatever rules the banks/building societies have themselves. The allowance is always about new money going in to your ISA "portfolio".

bigbars

Thanks for your feedback. now to find one that takes partial transfers. Was never a concern with previously low interest but now I’ll be on or over the limit I need to work a plan. One idea is, Maybe at maturity let it mature to a flexible isa, transfer a proportion of it to bring it sufficiently below limit otherwise it may be a regular task to have to move interest, or just risk breaching the limit. It’s Virgin, but you can never say never in banking.

kaMelo

Scot_39 said:

As someone who had money in the Icelandic banks when failed - I then stuck to the FSCS limits rigidly.

I had money in both, FSCS paid out within weeks - it targets 7 days, limit 10 for normal amounts.

When the second one was shutdown by UK watchdog before start of business on Monday, the Icelandic parents boss had given a live interview that weekend all was fine.

I had requested to move money final balance out, the shutdown froze all BACs transfers dead - so it left and never arrived in destination- a worrying few days followed.  BACs in the end recredited it in some way, and fscs paid it out, but a nervous few days. 

So another vote for partial transfer here to split.

The Icelandic banks were not UK regulated nor FSCS protected. The UK Government decided to cover eligible deposits then ask the Icelandic Government for the money back rather than individuals having to do it. It is still waiting to be reimbursed.

To the best of my knowledge, leaving aside credit unions, no UK regulated bank or Building Society taking retail deposits has ever needed the FSCS scheme to bail them out.

bundoran

kaMelo said:

Scot_39 said:

As someone who had money in the Icelandic banks when failed - I then stuck to the FSCS limits rigidly.

I had money in both, FSCS paid out within weeks - it targets 7 days, limit 10 for normal amounts.

When the second one was shutdown by UK watchdog before start of business on Monday, the Icelandic parents boss had given a live interview that weekend all was fine.

I had requested to move money final balance out, the shutdown froze all BACs transfers dead - so it left and never arrived in destination- a worrying few days followed.  BACs in the end recredited it in some way, and fscs paid it out, but a nervous few days. 

So another vote for partial transfer here to split.

To the best of my knowledge, leaving aside credit unions, no UK regulated bank or Building Society taking retail deposits has ever needed the FSCS scheme to bail them out.

Bradford and Bingley, Heritable, and London and Scottish were all UK regulated banks which were bailed out by the FSCS scheme in 2008. This cost over £16billion.

From the FSCS website:

https://www.fscs.org.uk/media/press/2018/sep/10-years-after-failures/

Key statistics from Autumn 2008

• Approximately £20.4 billion in compensation was paid by FSCS to customers of the five banks
• £15.65 billion for Bradford & Bingley
• £464.7 million for Heritable Bank
• £1,400.9 million for Icesave
• £2.58 billion for Kaupthing, Singer & Friedlander
• £237.4 million for London Scottish Bank

kaMelo

London Scottish Bank and Heritable Bank did not take retail deposits. Kaypthung and Icesave were not UK regulated nor FSCS protected. Payouts were made under Government directive rather than the FSCS scheme.

That leaves B&B which, as far as I was aware, was a straight transfer of the retail savings book to Santander. The FSCS payments were in relation to transfer of the loan book.

bigbars

Wow. Scary how this information is not widely broadcast.

bundoran

kaMelo said:

London Scottish Bank and Heritable Bank did not take retail deposits. Kaypthung and Icesave were not UK regulated nor FSCS protected. Payouts were made under Government directive rather than the FSCS scheme.

That leaves B&B which, as far as I was aware, was a straight transfer of the retail savings book to Santander. The FSCS payments were in relation to transfer of the loan book.

You are certainly wrong about Bradford and Bingley, and Heritable:

The FSCS bail out of Bradford and Bingley  of £15,65billion related to depositors funds, not loans:

“The FSCS was at the heart of responding to the banking crisis and compensated millions of people while paying out billions of pounds during 2008/09. After stepping in to fund the transfer of accounts of 2.5m depositors, at a cost of £15.65bn, FSCS will now repay its outstanding loan from the Treasury within ten years.”

https://www.fscs.org.uk/news/fscs-news/sale-of-remaining-bb-assets/

Heritable Bank took retail deposits. The Guardian reported their acquisition by ING: 

"ING acquires British deposits

Savings bank ING Direct UK announced today it was to acquire more than £3bn of deposits held by British savers with Icelandic-owned banks Kaupthing Edge and Heritable Bank"

and by This is Money:

"Heritable Bank will pass on all of its 22,200 customers and £538m in savings."

https://www.thisismoney.co.uk/money/saving/article-1643758/ING-buys-up-bust-Kaupthings-UK-savings.html

As for London and Scottish Bank they took deposits, as there's an FCA Supervisory note from 2008 saying:

"The Firm is required to refrain from accepting any deposits into: (a) any existing deposit accounts; or (b) any new deposit accounts."

https://www.fca.org.uk/publication/supervisory-notices/lsb.pdf

I suppoose it's possible that they were commercial rather than retail deposit accounts, but bearing in mind you were wrong about Bradford and Bingley and Heritable I doubt you'll have any evidence to back up your assertion that they didn't take retail deposits.

Swipe

kaMelo said:

Scot_39 said:

As someone who had money in the Icelandic banks when failed - I then stuck to the FSCS limits rigidly.

I had money in both, FSCS paid out within weeks - it targets 7 days, limit 10 for normal amounts.

When the second one was shutdown by UK watchdog before start of business on Monday, the Icelandic parents boss had given a live interview that weekend all was fine.

I had requested to move money final balance out, the shutdown froze all BACs transfers dead - so it left and never arrived in destination- a worrying few days followed.  BACs in the end recredited it in some way, and fscs paid it out, but a nervous few days. 

So another vote for partial transfer here to split.

The Icelandic banks were not UK regulated nor FSCS protected. The UK Government decided to cover eligible deposits then ask the Icelandic Government for the money back rather than individuals having to do it. It is still waiting to be reimbursed.

It was fully paid back by 2016:

https://www.gov.uk/government/news/uk-authorities-receive-final-payment-from-icesave

bigbars

IanManc said:

I remember the bail out for Bradford and Bingley and it was definitely for retail deposits, because I had quite a big sum - well big as far as I'm concerned - and was glad my savings were guaranteed by the FSCS.

My Dad had shares in Bradford and Bingley, and shortly before they went bust they had a rights issue. He bought shares in the rights issue, and they went bust immediately afterwards so he lost his money. For the rest of his life he felt he'd been conned into buying shares in a company when the directors of the company knew that it was basically insolvent. He never bought any more shares in anything after that.

As far as the OP is concerned, I would suggest opening a new ISA for the new money and transferring the old ISA to another institution that pays better interest. Then as the old ISA cash grows with the addition of interest I'd do a partial transfer to another ISA as and when needed, to keep everything below the compensation limit.

I'd never be keen to exceed the compensation limit no matter how good an interest rate I was offered. The risk, however slight, is not worth it and entirely avoidable.

Will definitely take your advice thanks, as I’m predicted to get nearly 4K interest at next maturity which will take me to 86k. So as you’ve suggested I’ll opt to transfer the interest into another isa. I presume as interest is not seen as “new” money I could use it to open a new flexible easy access isa or transfer it into a fix that allows deposits as it’s out of sequence with my other fix.