Which easy access ISA should I choose: Tesco or Shawbrook?

havingaball74

Hi,

I am looking to open a new cash ISA.

I'd like to use it to make regular transfers into a stocks and shares ISA and also use it as a rainy day fund so I've been looking at easy access ones. 

I'm torn between Shawbrook 4.33% (not flexible) or Tesco 4 25% (flexible but introductory one year rate). 

Which is better? Does it matter? Is a transfer (drip feed) into a stocks and shares ISA the same as a withdrawal? Can I link the ISA to a stocks and shares ISA?

Thank you!

Doctor_Who

havingaball74 said:

Hi,

I am looking to open a new cash ISA.

I'd like to use it to make regular transfers into a stocks and shares ISA and also use it as a rainy day fund so I've been looking at easy access ones. 

I'm torn between Shawbrook 4.33% (not flexible) or Tesco 4 25% (flexible but introductory one year rate). 

Which is better? Does it matter? Is a transfer (drip feed) into a stocks and shares ISA the same as a withdrawal? Can I link the ISA to a stocks and shares ISA?

Thank you!

The flexible ISA is useful if you need to withdraw money to use for spending etc and then want to replace it in the ISA later in the same tax year without affecting your ISA allowance.

Transferring from a cash ISA to a S&SISA is not a withdrawal (do not withdraw the money to put it in the S&SISA, do a transfer, otherwise the money will lose its ISA status).

I don't know of any cash ISAs you can link to S&SISAs. Each time you want to move money you will need to do an ISA transfer.

refluxer

How would drip-feeding from an Easy Access Cash ISA into a S&S ISA work ? Is this something you've done before ? If not, hopefully someone can advise on whether this is actually possible and, if so, how it works in practice.

As mentioned above, I would imagine you'll have to arrange a partial transfer each time and not carry out a withdrawal yourself, as any withdrawn cash would lose it's ISA status and paying that into a S&S ISA again would count towards your £20k allowance. 

One thing that might be useful to know is that Shawbrook tend to be a 'next working day'-type of bank when it comes to withdrawals, whereas payments in and out of Tesco accounts I've held in the past tend to be instant. The flexibility and truly instant easy access would tip things in favour of Tesco IMO, despite the slightly lower rate. 

havingaball74

Thank you. I am tempted by the Tesco account but it states that the rate is only for the first year and then drops. Does that mean that the Shawbrook account could potentially have that higher rate for longer?

Doctor_Who

havingaball74 said:

Thank you. I am tempted by the Tesco account but it states that the rate is only for the first year and then drops. Does that mean that the Shawbrook account could potentially have that higher rate for longer?

Who knows what rates will be in a year, but the rate on the Tesco ISA will drop significantly (to 1.1% currently) after 12 months. Do you need a flexible ISA? The Shawbrook ISA is at the top of the EA ISA rates table at present:

https://moneyfactscompare.co.uk/isa/easy-access-cash-isas/?quick-links-first=false

Stargunner

If you want to make regular payments to a S&S ISA it would be a lot easier to do it from a non Isa saving account, because every time you want to pay in to the S&S ISA you would need to request a partial transfer from your cash ISA provider which can take several days/weeks,

havingaball74

Thank you all. 
My circumstances are that I have a around 60k in a low performing cash ISA and really need to make my money work for me. My plan is/was to gradually transfer this money in stages into a Vanguard stocks and shares ISA. This though presents a problem in that Vanguard don't allow partial transfers in so it would be an all or nothing transfer of all my life savings which makes me nervous as I want to keep some money aside and do it gradually. I will start to invest in a Vanguard stocks and shares ISA using money from my current account but I'm flummoxed into how to invest my big cash ISA amount. I didn't account for Vanguard not doing partial transfers.

refluxer

havingaball74 said:

Thank you. I am tempted by the Tesco account but it states that the rate is only for the first year and then drops. 

Savings accounts with one year bonuses don't phase me any more because, if you want your money to work hard for you, then it's likely you'll have to move your money away long before the year is up, anyway. When Tesco increase the rate on their Internet Saver account, you simply open a new one to get the higher rate and move money across so it's possible you'd be able to do the same with the ISA.

havingaball74 said:

Does that mean that the Shawbrook account could potentially have that higher rate for longer?

No, not at all. Shawbrook are obviously currently very competitive with their easy access ISA and are 'top dog' at the moment, but there's no guarantee how long that will last. I actually held that account myself at the end of last year but was forced to abandon it because they stubbornly refused to increase the rate at a time when rates were shooting up elsewhere (we're talking months, not weeks). I've nothing against Shawbrook though - I have a number of other accounts with them and find them a good bank to deal with.

refluxer

havingaball74 said:

My circumstances are that I have a around 60k in a low performing cash ISA and really need to make my money work for me. My plan is/was to gradually transfer this money in stages into a Vanguard stocks and shares ISA. This though presents a problem in that Vanguard don't allow partial transfers in so it would be an all or nothing transfer of all my life savings which makes me nervous as I want to keep some money aside and do it gradually. I will start to invest in a Vanguard stocks and shares ISA using money from my current account but I'm flummoxed into how to invest my big cash ISA amount. I didn't account for Vanguard not doing partial transfers.

I'm no IFA, but I can't imagine it would be a good idea to put all of your life savings into a S&S ISA in one go.

If Vanguard won't allow partial transfers in, then one way round this would be to split the ISA you currently have into smaller chunks first. Doing partial transfers out into a mix of individual easy access, notice and fixed rate cash ISAs (over different durations) would leave you with easy access to some of it (as cash), some of it available to transfer to Vanguard straight away or in the near future (typically 3-6 months with a notice ISA, provided you give notice straight away) and then further portions of it would be available each time a fixed rate ISA matures (1-5 years).

In terms of fixing, the BoE have just raised the base rate by 0.25% and there's a chance that rates may continue to rise this year, so there may still be a bit of a way to go before certain fixes top out (you might not want to take out too many fixed rate ISAs at once if you want to hedge your bets).