Fixed rate ISA in years to come and 85k safety

masonic

In general, I've found that the big banks will support partial transfers for their easy access ISAs, so it may just require an intermediate step to transfer to one of them to facilitate splitting of a cash ISA that has grown too large.

bigbars

Yes, you're right. will just take a bit o forward planning in terms of moving a maturing fix isa into an easy access isa, split to a decent level below 85k, by transferring the excess to another isa and then transfer the easy access back into another fix.

Even just working out how much to get below the limit hurts my head.. as i thought i had allowed enough wiggle room for interest, but that was pre-pandemic when rates were low. on my current 5.7% fix, that would get me 4.8k in interest in a years time, so just to allow room for a few years interest payments assuming rates are roughly in the ball park that they are now, i would have to conceivably drop the balance down to say 65-70k just to allow room for 3 years worth of interest payments.

We need to start a, increase the 85k comp limit campaign...

SickGroove

I've got a 1 year fixed Shawbrook ISA due to mature in October this year...

Got 81K in there & interest is compounded at the moment. I opted for monthly interest payments

I think Shawbrook allow you to switch from monthly compounded interest to monthly paid away interest...

At maturity I'm thinking of fixing with them again for another year with monthly compounded interest until I get just below the 85K safe limit...then switching to monthly paid away.

Any pitfalls in doing this?

bigbars

I'd defo suggest that you double check the calculator on it. Rough calculation based on 81k at 3.6% interest on a 1 year fix with annual interest would give an interest payment of roughly 4k, give or take depending on the fixed rate you got. So in your case with monthly interest you may want to think about how to manage that. As a few of us have spoken about, it may be a consideration to roll it into an easy access  isa on maturity, transfer out a portion to get you sufficiently below the 85k limit then move it into another fix. Or another option which isn't ideal is to have the interest paid straight into an easy access isa or normal account. still depends on allowance available in this tax year. make a rough decision how long you are thinking of keeping the isa, eg. for x years, then allow for x years worth of interest payments being added.

In hindsight I should have thought about it a lot sooner rather than let the balance get so close to the limit, but easy to say now.
now I'm forced into having isas scattered around with different providers i didn't really want but enforced due to the limit and parent company situation.

Example for this theory is being in a 2 year fix of 5.76% with an opening balance of 75k pays roughly 4.3k interest in the first year, so by the time of the maturity in 2 years it will be close or over the limit. So really on current levels, 70k probably a decent benchmark before ceasing additional deposits.

Ultimately it'll be a consideration at some point whichever way you play once you have a decent some may say healthy ISA balance, the more you're on top of it, which i wasn't too proactive on, the less you'll have to move around. I never ever thought it would be a consideration, so for many years i knew of the limit, but never thought id ever get to those levels, so kept every year depositing work bonuses and savings.

Hope I've explained that ok, sorry if i babbled on a bit.

VNX

bigbarslj said:

I was or am in a similar position. My fixed rate cash isa with virgin is close to the limit. The hassle to attempt to reduce it will be difficult as most providers don’t accept or allow partial transfers in or out. So I will just move it to better rates as and when required and pray virgin doesn’t go under as it’s the amount over the 85k which isn’t covered and at risk. 

Pertinent to this is the dates of maturity, I have a staggered system for my multiple fixes which poses more problems. So I have to pick just one each your to fund or start a new one.

With your opportunity and level of advanced planning I would move the 60k isa to better rates as and when possible but not add funds to it and open a new one for your next allowance with a different provider to whichever holds the 60k as the 85k limit is by provider not isa. Also essential to make sure providers don’t fall under the same parent institution as that can make you fall foul for 85k.

I never anticipated rates to be high enough to bring mine close to the limit and was naive on the planning to the point my interest once added this year or next will take me over.

frustrating to keep an eye on but manageable once you are aware. especially thanks to some of the great contributors to this forum. Otherwise I would have just one huge isa.

When the fix matures just transfer it all to an instant access isa and immediately move parts of the balance to various new fixes 

bigbars

VNX said:

bigbarslj said:

I was or am in a similar position. My fixed rate cash isa with virgin is close to the limit. The hassle to attempt to reduce it will be difficult as most providers don’t accept or allow partial transfers in or out. So I will just move it to better rates as and when required and pray virgin doesn’t go under as it’s the amount over the 85k which isn’t covered and at risk. 

Pertinent to this is the dates of maturity, I have a staggered system for my multiple fixes which poses more problems. So I have to pick just one each your to fund or start a new one.

With your opportunity and level of advanced planning I would move the 60k isa to better rates as and when possible but not add funds to it and open a new one for your next allowance with a different provider to whichever holds the 60k as the 85k limit is by provider not isa. Also essential to make sure providers don’t fall under the same parent institution as that can make you fall foul for 85k.

I never anticipated rates to be high enough to bring mine close to the limit and was naive on the planning to the point my interest once added this year or next will take me over.

frustrating to keep an eye on but manageable once you are aware. especially thanks to some of the great contributors to this forum. Otherwise I would have just one huge isa.

When the fix matures just transfer it all to an instant access isa and immediately move parts of the balance to various new fixes 

Unfortunately its not as straight forward as you think, as not all providers allow partial transfers. So you may be limited to providers or deals that you dont want to deposit into. In the same way that not all products allow transfers full stop. Not allowing partial transfers is an easier way for some providers to ensure they get large deposits. The opposite is those that advertise high rates, but dont allow transfers so you are pretty much getting a high rate but starting on 0, an example of this is monthly or regular saver isa's.

VNX

bigbarslj said:

VNX said:

bigbarslj said:

I was or am in a similar position. My fixed rate cash isa with virgin is close to the limit. The hassle to attempt to reduce it will be difficult as most providers don’t accept or allow partial transfers in or out. So I will just move it to better rates as and when required and pray virgin doesn’t go under as it’s the amount over the 85k which isn’t covered and at risk. 

Pertinent to this is the dates of maturity, I have a staggered system for my multiple fixes which poses more problems. So I have to pick just one each your to fund or start a new one.

With your opportunity and level of advanced planning I would move the 60k isa to better rates as and when possible but not add funds to it and open a new one for your next allowance with a different provider to whichever holds the 60k as the 85k limit is by provider not isa. Also essential to make sure providers don’t fall under the same parent institution as that can make you fall foul for 85k.

I never anticipated rates to be high enough to bring mine close to the limit and was naive on the planning to the point my interest once added this year or next will take me over.

frustrating to keep an eye on but manageable once you are aware. especially thanks to some of the great contributors to this forum. Otherwise I would have just one huge isa.

When the fix matures just transfer it all to an instant access isa and immediately move parts of the balance to various new fixes 

Unfortunately its not as straight forward as you think, as not all providers allow partial transfers. So you may be limited to providers or deals that you dont want to deposit into. In the same way that not all products allow transfers full stop. Not allowing partial transfers is an easier way for some providers to ensure they get large deposits. The opposite is those that advertise high rates, but dont allow transfers so you are pretty much getting a high rate but starting on 0, an example of this is monthly or regular saver isa's.

Fair enough, I’ve moved ISAs many times and never had issues finding an institution not accepting transfers or partial transfers but fair point. 

bigbars

VNX said:

bigbarslj said:

VNX said:

bigbarslj said:

I was or am in a similar position. My fixed rate cash isa with virgin is close to the limit. The hassle to attempt to reduce it will be difficult as most providers don’t accept or allow partial transfers in or out. So I will just move it to better rates as and when required and pray virgin doesn’t go under as it’s the amount over the 85k which isn’t covered and at risk. 

Pertinent to this is the dates of maturity, I have a staggered system for my multiple fixes which poses more problems. So I have to pick just one each your to fund or start a new one.

With your opportunity and level of advanced planning I would move the 60k isa to better rates as and when possible but not add funds to it and open a new one for your next allowance with a different provider to whichever holds the 60k as the 85k limit is by provider not isa. Also essential to make sure providers don’t fall under the same parent institution as that can make you fall foul for 85k.

I never anticipated rates to be high enough to bring mine close to the limit and was naive on the planning to the point my interest once added this year or next will take me over.

frustrating to keep an eye on but manageable once you are aware. especially thanks to some of the great contributors to this forum. Otherwise I would have just one huge isa.

When the fix matures just transfer it all to an instant access isa and immediately move parts of the balance to various new fixes 

Unfortunately its not as straight forward as you think, as not all providers allow partial transfers. So you may be limited to providers or deals that you dont want to deposit into. In the same way that not all products allow transfers full stop. Not allowing partial transfers is an easier way for some providers to ensure they get large deposits. The opposite is those that advertise high rates, but dont allow transfers so you are pretty much getting a high rate but starting on 0, an example of this is monthly or regular saver isa's.

Fair enough, I’ve moved ISAs many times and never had issues finding an institution not accepting transfers or partial transfers but fair point. 

It’s cool, thanks very much for your input. Took me a while to get my head around it all, such a faff process, as before I just had one account and one isa until reading forums like this I heard about the limit which I never expected to be a consideration, actually it was the northern rock, Icelandic bank collapse which brought it to the fire. and now I’m careful to avoid the situation again that I don’t let new ones get above 65k to allow wiggle room for interest payments. The annual limit and compensation limit really should be increased as it was fine 10 or so years ago, but now it needs to move with the times.

 Until you start to contemplate, why do some providers offer certain features and others don’t. For many it’s hidden in the small print. Shawbrook is a great example, one of the only ones who offer a fix that you can continue to deposit throughout the term, whereby most others you are restricted to just the first month. It’s not always clear and obvious. So why don’t others offer that facility? Or why certain providers are consistently near the top of the rate tables, how do others make business near the bottom as surely everyone will gravitate to the better ones…

sorry to digress, but hopefully you get my point. early morning thoughts and all.

SickGroove

So, been thinking a little more that when my 1 year fixed rate Cash ISA with Shawbrook matures next month...

I should have around 82ishK...

Could I then fix for another year (probably stay with Shawbrook) but specifically state I only want to fix exactly 80K of my balance (I'm a bit OCD with odd amounts so just want exactly 80K) & have monthly interest paid away then just let the remaining 2ishK go into their easy access Cash ISA again with interest either compounded or paid away? Obviously, if I then eventually withdraw the balance from my easy access Cash ISA I appreciate I'll lose the tax benefit of that.

Basically, can I split my maturing funds with the same provider, once my maturity options are emailed to me?

bigbars

I believe you could in theory, convoluted, but I get it. I would suggest messaging them for clarification as different providers have different rules.

For example, on the virgin portal you can easily set your interest instructions, to one of; deposit it in your cash isa, another virgin account or an external account.

when i understood the 85k limit, I took steps to remedy it.  I chose on maturity of my fixed isa to let it become an easy access isa, then transferred a portion into an easy access isa with another provider to get me sufficiently below the limit. then transferred the original isa into a new fix.

So if it's similar to my other Fixed ISA providers, to be able to have a specific balance, when your ISA matures, you would have to mature it into a flexible isa, do your withdrawal/transfer to the required balance, then move it into a new fix, but you run the risk of fixes being lost or dropped off availability whilst you're in that process.

Due to better rates being widespread, I am now over the limit yet again, its such a faff to fix, I know how to manage it better on my other isa's , for me that means not letting any other one go over 65k, but i am just leaving one over the 85k limit and live with the risk for now. until i get to a point i can synch the maturity of the fix with another one or close to another one so that I can seriously get below the 85k limit again and leave sufficient room for a number of years of interest payments.

Good luck