Splitting ISAs into smaller amounts to stay within FSCS Limits

SydSnott

Title says it all really, I have two ISA's approaching the magic 85K.
Is it allowed to "split" the proceeds at maturity into two separate ISA's?

refluxer

SydSnott said:

Title says it all really, I have two ISA's approaching the magic 85K.
Is it allowed to "split" the proceeds at maturity into two separate ISA's?

When you say maturity, presumably the current ISAs are fixed rate cash ISAs ? I've come across some providers that allow you to split the balance over various products (with the same provider) as part of the maturity process but as you're wanting to transfer to a different provider (or two), then the best option would be to request that the account gets converted (internally transferred) to an easy access cash ISA with the same provider at maturity and, from there, you should be free to split the ISA up and transfer out whenever you like. You would just need to read the new easy access account T&Cs to ensure that partial transfers out are allowed and the T&Cs of the ISA you want to transfer into to ensure that partial transfers-in are allowed. You would then request the transfers via whatever official ISA transfer process the new ISA provider provides. 

Note that things can get a bit complicated if either of your current ISAs contain contributions from the current tax year, as those contributions must stay together.

One thing you must do first is check what the maturity options are in the T&Cs of your current ISAs. With most providers, a maturing fixed rate cash ISA will default to a 'maturity' or easy access cash ISA but some (eg. Ford Money) will automatically take out another fixed rate product of the same duration if they don't hear from you, meaning that you must submit your maturity instructions in good time if you don't want this to happen.

 

SydSnott

Thanks for that detailed explanation refluxer, appreciated.
Both those ISAs are 1 year fixed as you correctly presumed.
Neither contain any investment from the 23/4 tax year allowance, so I'd better get reading the small print!
I will have the same problem with a Fixed rate Bond at maturity, but that's hopefully a simpler fix!

refluxer

SydSnott said:

Both those ISAs are 1 year fixed as you correctly presumed.
Neither contain any investment from the 23/4 tax year allowance, so I'd better get reading the small print!

That's good as it makes things a bit more straight-forward. To be fair, most ISA T&Cs are pretty similar but you will find the odd provider who won't allow transfers in or may limit you to full (rather than partial) transfers in or out, so it always makes sense to check T&Cs carefully just in case.

While I have had the odd easy access cash ISA in the past (particularly last year when rates were rising fairly quickly), I tend to favour fixed rate ISAs and prefer to keep my yearly cash ISA contributions separate. This obviously takes a bit more managing but, for me at least, the pros definitely outweigh the cons - not only does it allow you to adopt a 'savings ladder' approach (by taking out fixed rate ISAs at different times of the year and for different durations), but it keeps you well under the FSCS limit which in turn allows you to open other (ISA and non-ISA) accounts with the same provider if needed.

SydSnott

Good Idea, I might try it.
I've had no strategy so far, but the "Liz Truss" debacle has really made management of investments a bit like herding cats!

eskbanker

SydSnott said:

Good Idea, I might try it.
I've had no strategy so far, but the "Liz Truss" debacle has really made management of investments a bit like herding cats!

After the discussion about your substantial cash holdings, your mention of investments made me think that you might be holding too much cash and could benefit from considering actual investing rather than saving, for at least some of it, but I see that I did make this point previously!

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