Multiple Fixed Rate ISAs

Onebar

I’ve got £20k in a 3 year fixed rate ISA, am I right in thinking that in the next financial year I can take out another say £20k fixed term ISA or given the current one is fixed I’m precluded from taking another ISA until the current 3 year fix matures? Hope that makes some semblance of sense.

MDMD

You can hold as many iSAs as you want, the restriction is you can only pay new money into one of each type (Cash, Shares etc) each tax year and total contributions of new money in a tax year cannot exceed £20k.

Onebar

Thanks for clarifying MDMD, much appreciated.

Peter999_2

Between me and my wife we have 6 ISAs running at the same time, all taken out in different years.   When there is a good deal on an ISA that allows you transfer other ISAs in we do that.    One of the ISAs is up to £60,000.     Obviously, you need to make sure that the ISA with interest doesn't take you over the £85,000 protected level with each bank but we're not there yet, haha.

WHUFC123

So if I have a 2 year isa ( currently 10 months into it at 4 % ), also a 2yr on opened in May this year at 4.40% , but notice there’s a new deal at 4.73% available elsewhere now I could transfer the 4% one to that ( is that right )

refluxer

WHUFC123 said:

So if I have a 2 year isa ( currently 10 months into it at 4 % ), also a 2yr on opened in May this year at 4.40% , but notice there’s a new deal at 4.73% available elsewhere now I could transfer the 4% one to that ( is that right )

Yes, you can usually transfer fixed rate ISAs before their maturity date but you will pay a penalty to do so - the longer the fixed rate duration, the higher the penalty.

The penalty for transferring out of a 2-year fixed rate ISA early is usually 180 days-worth of interest so you would lose 6 of the 10 months you've already gained. You'd need to check your T&Cs for the penalty and do your sums to work out whether a 0.73% gain for the remainder of what would have been the original 2-year term would outweigh the penalty, but I suspect not.

I've got a 1-year fixed rate ISA from the end of last year that is a fair amount lower than 4% but, despite that, I calculated that the rates would need to be substantially higher than they are now to make an early transfer worth it at this stage. You have a longer period than me though, which is why you'd need to do the sums before making a decision.

There are plenty of different ways for working this out but here's one way I would look at it...

Roughly-speaking, if your penalty is in-fact 180 days (6 months) then you would have lost 6/10 of the interest earned so far, which would give you an effective return of 2.4% (6 tenths of 4%) for the last 10 months. You'd then be moving to a new rate of 4.73% for the remainder of what would have been the original 2-year term (so 14 months)

(2.4% x 10 months) + (4.73% x 14 months) = 90.22% / 24 (months) = an average of 3.76% over that 2-year period (so lower than you're on now and therefore it's not worth switching)