Is transferring to fixed-rate ISA worth it?

Yawn
Yawn Posts: 151
Name Dropper First Anniversary First Post Combo Breaker
Forumite
edited 10 October 2023 at 10:20AM in ISAs & tax-free savings
Hi all,

I currently have an easy access cash ISA (paying 4.5%) so that I could build up a decent amount of savings. I'm now thinking of locking in a one-year fixed rate. The rate offered by my current provider isn't very competitive (5.2%). Virgin is offering 5.85%. But is it worth switching? I saw that transfers can take up to two weeks, so that would eat up a chunk of the difference. 

Never tried an ISA transfer before. Would be grateful for the advice!

Thanks!

Comments

  • Albermarle
    Albermarle Posts: 21,006
    First Anniversary First Post Name Dropper
    Forumite
    There is a sub forum for ISA's, where fixed rates/transfers are discussed daily. So probably worth spending some time looking through that.
    ISAs & tax-free savings — MoneySavingExpert Forum
  • ro1892
    ro1892 Posts: 48
    Name Dropper First Anniversary First Post
    Forumite
    It probably comes down to:

    What you think the interest rates will do in the next year
    If you lock away for a year now and they go up, you may have been better keeping it in the variable account. However if they go down, then you could be pleased you fixed it.

    Will you definitely not need the money in the next year? Having said that, ISAs are different from fixed term bonds where by law they allow you to withdraw (but they charge a penalty - normally equal to a loss of X days interest on the amount withdrawn). If you think there's a chance you may need to access the money you probably want to check the penalty for the ISA you're thinking of transferring to so you know what you'd lose if you needed some or all of the money.

    In my experience of transferring ISAs most have been done within a week (the ones I've been able to do online, the ones where you have to fill out forms and post can take longer). Some ISA providers will backdate the interest from the day you opened the account/told them you wanted to transfer from another provider, so if you started the transfer on 2nd October and it took 10 days they could backdate the interest from 2nd October (it would be worth checking the T&C's of the ISA you want to transfer to, to see whether they will backdate the interest).

    Also worth checking the ISA you want to move to allows transfers in (not all do, some only accept new money).
  • Beddie
    Beddie Posts: 558
    First Post Name Dropper First Anniversary Combo Breaker
    Forumite
    If you're happy to lock the money away for a year Virgin money is a good rate. I moved some money to them and it only took a few days. you will earn interest at your current provider until the day of transfer, so you won't lose any interest.

    Open the Virgin account, it asks do you want to transfer, fill in the details of your existing ISA and it will be done for you. Easy.
  • Ocelot
    Ocelot Posts: 489
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    You wouldn't lose the interest during the transfer process.
  • MDMD
    MDMD Posts: 1,410
    First Anniversary First Post Name Dropper
    Forumite
    I transferred an ISA from RBS to VM last week that took about three hours frim opening the account to being complete.
  • lohr500
    lohr500 Posts: 920
    First Post Name Dropper First Anniversary Combo Breaker
    Forumite
    If you are thinking of transferring to the Virgin 1 year fix, I would grab that deal now as it may not stick around long.

    You don't need to initiate the transfer immediately if you are still unsure, and as I understand it, so long as you don't put funds in it, you can always open another ISA elsewhere if a better rate comes along. But by opening it, you will secure the 5.85%. 

    Presume you are aware that the Virgin 5.85% ISA is exclusively for existing Virgin current a/c holders only.
  • SickGroove
    SickGroove Posts: 224
    First Post Name Dropper First Anniversary
    Forumite
    edited 8 October 2023 at 9:13AM
    lohr500 said:
    If you are thinking of splitting transferring to the Virgin 1 year fix, I would grab that deal now as it may not stick around long.

    You don't need to initiate the transfer immediately if you are still unsure, and as I understand it, so long as you don't put funds in it, you can always open another ISA elsewhere if a better rate comes along. But by opening it, you will secure the 5.85%. 

    Presume you are aware that the Virgin 5.85% ISA is exclusively for existing Virgin current a/c holders only.
    Morning, so can I open the Virgin account today but not fund it for a couple of weeks, as my current Shawbrook fix doesn't mature till then...

    IE can you open without giving transfer details at sign up, but provide them within a certain timescale IE 30 days or something?
  • Shedman
    Shedman Posts: 1,477
    First Anniversary First Post Photogenic Name Dropper
    Forumite
    lohr500 said:
    If you are thinking of splitting transferring to the Virgin 1 year fix, I would grab that deal now as it may not stick around long.

    You don't need to initiate the transfer immediately if you are still unsure, and as I understand it, so long as you don't put funds in it, you can always open another ISA elsewhere if a better rate comes along. But by opening it, you will secure the 5.85%. 

    Presume you are aware that the Virgin 5.85% ISA is exclusively for existing Virgin current a/c holders only.
    Morning, so can I open the Virgin account today but not fund it for a couple of weeks, as my current Shawbrook fix doesn't mature till then...

    IE can you open without giving transfer details at sign up, but provide them within a certain timescale IE 30 days or something?
    There is also an option that you could open the account now and select the transfer option during the application process as you are given 2 tick box choices regarding transfers:
    1) to either action the transfer straightaway and you'll bear any penalties incurred or
    2) to wait until the end of the notice period or till the maturity date of a fixed ISA - so long as that is within next 6 weeks

    Clearly it would be option 2 that you would need to select.

    I would, however, recommend taking screenshots  (or photos if you can't screenshot) of the relevant screens, esp the one where you've ticked the "wait until maturity" box so that there is comeback should the transfer occur too early and you get hit with a penalty (not saying it will happen but best to have some proof)
  • lohr500
    lohr500 Posts: 920
    First Post Name Dropper First Anniversary Combo Breaker
    Forumite
    lohr500 said:
    If you are thinking of splitting transferring to the Virgin 1 year fix, I would grab that deal now as it may not stick around long.

    You don't need to initiate the transfer immediately if you are still unsure, and as I understand it, so long as you don't put funds in it, you can always open another ISA elsewhere if a better rate comes along. But by opening it, you will secure the 5.85%. 

    Presume you are aware that the Virgin 5.85% ISA is exclusively for existing Virgin current a/c holders only.
    Morning, so can I open the Virgin account today but not fund it for a couple of weeks, as my current Shawbrook fix doesn't mature till then...

    IE can you open without giving transfer details at sign up, but provide them within a certain timescale IE 30 days or something?
    I can't remember the exact process for new customers, but if you look at the Ts &Cs for the current Virgin 1 year fix Cash E-ISA it says : 
    • To ensure money is accepted into your new account we must receive all money within 30 days from your account opening date. Any deposits received after 30 days may be returned to you. Therefore if you wish to add to your ISA every tax year this product will not be suitable. Fixed Rate Cash ISAs are not suitable for regular deposits.
    So basically you open the account and tick whatever option it says to fund the ISA at a later date. Then when you are ready to transfer the funds from your Shawbrook fix, you instruct Virgin to initiate the transfer.
    The only hiccup could be if the transfer process takes more than 2 weeks after you initiate it in 2 weeks time, thus taking you beyond the 30 day ruling in the Ts&Cs.

    I have an existing Virgin 1 year fix which ends on the 24th October. A couple of days ago I opened a new 1 year fix ISA with them at 5.75% (Issue 619). That grabs the 5.75% rate and once the exiting fixed ISA matures on the 24th I will instruct them to transfer it to the new one.

    If, in the meantime they roll out a better rate, or a better rate appears elsewhere that I fancy, then I won't fund the Issue 619 ISA. But if rates drop between now and the 24th October, I can still transfer the funds to the issue 619 ISA.  

    Even after funding a Virgin ISA, if a better rate is available on a newer Virgin ISA within 14 days, you can open the newer ISA and ask them to transfer your money into the new product. And keep doing that every 14 days if better new rate ISAs are rolled out. We did this twice earlier in the year with my wife's ISA. 
Meet your Ambassadors

Categories

  • All Categories
  • 341.6K Banking & Borrowing
  • 249.6K Reduce Debt & Boost Income
  • 449.1K Spending & Discounts
  • 233.7K Work, Benefits & Business
  • 605.8K Mortgages, Homes & Bills
  • 172.4K Life & Family
  • 246.6K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards