Transferring a Cash ISA to another ISA provider.

AlmereIan

I set up a Cash ISA in March this year with Barclays Bank, on a 1 year fixed interest rate.
I have now set up another Cash ISA in May this year with Virgin. The Virgin rate is a lot better for a 1 year fixed rate.
If I transfer the Barclays one over to the Virgin one now, will I get part of the 1 year interest from Barclays? i.e. 3 months worth? Or will I lose any interest earned in those 3 months?

refluxer

The penalty for closing or transferring the whole balance from a Barclays Flexible Cash ISA before maturity is 90 days-worth of interest so if it was set up after 6th March and you had the interest set to be paid into the account then you'll get less back less than you put in and if it was set up between 1st and 5th March, then you'll only end up with a very small amount of interest after the penalty is deducted. If you opted to have monthly interest paid away, then the 90 day penalty will be deducted from the opening balance.

What rate did you get with the Barclays ISA ? While the Virgin rate is undoubtedly higher (as rates have risen since March), it may not be high enough to make an early transfer worth it. For example - the Barclays ISA was paying around 4% in March so the 90 day penalty would be equivalent to around 1%. If you were to transfer to the Virgin ISA currently paying 4.47%, then you would lose out as that extra 0.47% won't make up for the Barclays penalty. Also bear in mind that the Virgin ISA will probably have a limited window for transferring in.

You can make up to 3 withdrawals from the Barclays Flexible ISA (up to 10% of the balance for each one) which would allow you to withdraw at least some of the funds and might be an alternative option to consider, however the net result of that would be reducing the overall amount shielded from tax if that money wasn't replaced in the Barclays ISA before it matures so it's not one that I would consider, personally.

Here is the relevant part from the Barclays T&Cs but make sure you read the complete document carefully before making any decisions...

Can I withdraw money?

• Yes, a maximum number of 3 free withdrawals are allowed during the term of the Premier Flexible Cash ISA.

• The maximum value per withdrawal on this cash ISA is 10% of your balance at the time the withdrawal is made.

• If you need to, you may close the account or transfer-out the whole balance before the maturity date. This will result in a charge equivalent to 90 days’ tax-free interest based on the current balance at the time. If there is insufficient earned or accrued interest (or where you have chosen the monthly interest payment frequency option), then the amount of the charge will be taken from the funds in the account and you may therefore get back less than you deposited. The charge does not apply if your account is closed during the cancellation period or due to the event of death or bankruptcy.

AlmereIan

Thanks for that refluxer.
Your figures are all spot on. I had read somewhere that a transfer could be made, but I believe this didn't take into account all the penalties you have mentioned.
It makes sense to leave it where it is, until the year has passed.
Thanks for the clarification.