New ISA stopped taking deposits…can I open another ISA

Db54321

Hi All,

Possibly a question that’s been asked before, but would really appreciate some advice.

I opened a Principality ISA about 2 months ago and have about £1,000 in it, but they have now withdrawn the isa from sale and will no longer take deposits, this as you can imagine renders the account absolutely useless when I should be able to save 20k per year.

So, my question is, can I open another new cash isa with a different provider and transfer this money over and then continue to pay into the new ISA? I understand that I can’t pay into 2 ISAs in one year, hence the confusion.

Thank you

aaj123

Looks like you need to transfer out the amount from the Principality ISA (albeit I assume this will involve a small penalty as this must be a fixed rate ISA given it won't take deposits). And then you can add into the account you have transferred into.

Db54321

Yes, fixed rate ISA

Albermarle

Db54321 said:

Yes, fixed rate ISA

Most ( not all) fixed rate savings accounts/ISA's  will not let you add anymore after the initial funding window ( usually 14 days approx)
If this was the case it should have been made clear when you opened the account.
Although reading terms and conditions for most things is boring and not always necessary, it is worth checking them for savings accounts.

jimjames

Db54321 said:

So, my question is, can I open another new cash isa with a different provider and transfer this money over and then continue to pay into the new ISA? I understand that I can’t pay into 2 ISAs in one year, hence the confusion.

Thank you

You can still open a Stocks and Shares ISA as well as a Lifetime ISA (depending on your age)

Db54321

Thanks @Albermarle There wasn’t an initial funding window on this one, it’s one of the reasons why I chose it. I was aware that they might stop deposits if they stopped selling the product but as it was new to market when I signed up I figured they’d keep it open for a few months at least

Beddie

Db54321 said:

Hi All,

I opened a Principality ISA about 2 months ago and have about £1,000 in it, but they have now withdrawn the isa from sale and will no longer take deposits, this as you can imagine renders the account absolutely useless when I should be able to save 20k per year.

Did you pay into it then as well? If before the 6th April, then it was last tax year and you have another £20k allowance to play with. I'm guessing this isn't the case, but thought I'd type all this out anyway!

Db54321

Thanks for the suggestion @Beddie, but no. I opened the isa after the 6th

refluxer

Yes, as mentioned above - you can transfer it and then pay more in but if you want a fixed rate ISA with the ability to pay into it over the whole duration then you'll have to pick one that allows this (the majority don't).

What duration did you decide to take out the existing fix for ? If it was for a year and that was only two months ago, then the 90 day interest penalty for transferring means you'll get back less than you've put it and if it's for 2 or more years, then the penalties will be even higher.

Db54321

Sadly it was for 2 years. Push come to shove I’ll just reinvest elsewhere but disappointed, they didn’t even inform me that they’d taken it off sale. Won’t be using them again

refluxer

Db54321 said:

Sadly it was for 2 years. Push come to shove I’ll just reinvest elsewhere but disappointed, they didn’t even inform me that they’d taken it off sale. Won’t be using them again

On the plus side - it's 'only' £1000 so the penalty won't be that much. What was the interest rate ?

IIRC, a 2 year fixed cash ISA from the Principality was around 3.85% at the start of April this year so if that's the case then, using this simple online interest calculator, the 180 day interest penalty for £1000 would only be around £19... and that's presuming the £1000 was in there from day 1 - if you've been paying into it gradually, then it would be less.

If you know for sure you'll be paying tax on your savings interest and would like to make more use of the current ISA allowance than the £1000 you've already used (ie. closer to £20k than £1k), then it might be worth transferring and taking that relatively small hit.

Do make sure you do your sums carefully (and get confirmation from the Principality about the exact penalty amount) before proceeding though and also make sure that you'll actually benefit from putting money into an ISA - ie. you're likely to earn more than £1000 in interest this tax year if you're a basic rate tax-payer (or £500 as a higher-rate tax payer) and bear in mind that low-earners can potentially earn up to £18,570 before paying tax on savings interest (see the MSE guide on the Starter Savings Rate here)

If you do decide that an ISA is still right for you and want to pay into it gradually over the course of the tax year, then you might want to consider an easy access cash ISA instead as there will be less restrictions with that type of account than a fixed rate. You'd be free to transfer into a fixed rate ISA at any point, which could actually pay off in the near future (IMO) seeing that rates are rising steadily at the moment.