New Cash Isa Account

Nijinsky

I wish to set up my first Cash Isa account, I have never done this before, so I would appreciate some advice from some of you experts who have experience.

I have enough in the bank to transfer the maximum 20k allowance into an account. Obviously, I will be going for the account with the highest interest to get the best deal.

Now correct me if I'm wrong, but as the interest decreases after the first year, would the best way to make money be as simple as selecting the account with the highest interest for a year, then after that first year ends, look at transferring to another account with another high interest for the next year?

I also need to decide whether to go for an easy access or fixed rate account. The highest interest fixed rate accounts only have a 1 year duration. Does it make any difference whether I use an easy access or fixed rate, if I transfer after the first year?

I shouldn't need to dip into my 20k at any point during the first year. I plan on selecting an account with the highest interest, leave the 20k sitting in there to make a profit, then instead of staying for a lower, second year interest rate, transfer my sum into another account with the highest interest rate to continue gathering the higher, first year interest rates.

If I did that though, would I still be restricted to only a maximum of 20k for my second year if I transferred? If I for example put 20k into an account and got 21k back after the first year, could I transfer that 21k into a different account with a higher interest, or would I still only be allowed a maximum of 20k to be transferred?

Would it be better for me to select a longer term fixed rate account and leave my money sitting in there so I could accumulate more than the initial maximum 20k for the first year and let it build, meaning I will accumulate more in the long term and not be restricted to a maximum 20k in the account?

I expect a lot of what I've said is wrong and this is why I'm posting. Any advice would be greatly appreciated.

Thanks,

Ross

eskbanker

Nijinsky said:

I wish to set up my first Cash Isa account, I have never done this before, so I would appreciate some advice from some of you experts who have experience.

I have enough in the bank to transfer the maximum 20k allowance into an account. Obviously, I will be going for the account with the highest interest to get the best deal.
It's not really obvious as such, many will deliberately pick rates below the highest for a variety of valid reasons, e.g. not wanting to fix, or preferring to have branch access, or not wanting to exceed FSCS protection limits, etc, etc.

Now correct me if I'm wrong, but as the interest decreases after the first year,
That's not a given, interest can change at any time (variable rate products), or after any predefined period, not just one year (fixed term products), i.e. you can fix the rate for two, or three, or even five years if you wanted.

would the best way to make money be as simple as selecting the account with the highest interest for a year, then after that first year ends, look at transferring to another account with another high interest for the next year?
It's perfectly valid to do that, if you want to commit to a one-year fix and then continue thereafter.

I also need to decide whether to go for an easy access or fixed rate account. The highest interest fixed rate accounts only have a 1 year duration. Does it make any difference whether I use an easy access or fixed rate, if I transfer after the first year?
If you go with easy access, you can change to a different product at any time, whereas with a one-year fix, you're effectively committing to that period - you'd be able to shift your money if necessary, but only on payment of an early withdrawal penalty which would probably more than negate the benefit of using a fix in the first place.

I shouldn't need to dip into my 20k at any point during the first year. I plan on selecting an account with the highest interest, leave the 20k sitting in there to make a profit, then instead of staying for a lower, second year interest rate, transfer my sum into another account with the highest interest rate to continue gathering the higher, first year interest rates.

If I did that though, would I still be restricted to only a maximum of 20k for my second year if I transferred?
No.

If I for example put 20k into an account and got 21k back after the first year, could I transfer that 21k into a different account with a higher interest, or would I still only be allowed a maximum of 20k to be transferred?
You can transfer the full amount, as long as you use the receiving provider's ISA transfer process.

Would it be better for me to select a longer term fixed rate account and leave my money sitting in there so I could accumulate more than the initial maximum 20k for the first year and let it build, meaning I will accumulate more in the long term and not be restricted to a maximum 20k in the account?
False dichotomy - you can contribute up to £20K into cash ISAs every year, as well as continuing to benefit from interest accumulation, i.e. if you paid £20K into an ISA now, you could pay another £20K into another one (or perhaps the same one, Ts & Cs permitting) from 6 April.

I expect a lot of what I've said is wrong and this is why I'm posting. Any advice would be greatly appreciated.

Thanks,

Ross

Comments inline above - overall it seems like you're perhaps overthinking ISAs, which aren't really massively different from taxable savings accounts, other than having an annual contribution limit (and being tax-free of course!)....

GrubbyGirl_2

Eskbanker has answered perfectly above.  When looking at fixing you do need a bit of a crystal ball to predict where interest rates are going.  Most of my ISAs I put into 1 year fixed, but because interest rates were good last April I decided to fix my new £20k for 5 years.  The Bank of England rate was 4% and the fix was 4.18%.  At that time I felt that the B of E rate was unlikely to rise much more but clearly I was wrong and I thought that I'd made a big mistake.  However the higher 5 year rates only really stuck around until the base rate stabilised and clearly banks are now predicting them to come down again and the 5 year rates are pretty much at a similar level to April 2023, so maybe I didn't make too big a mistake.

The longer you fix the bigger the crystal ball you need, but also the more you can gain in the long term.  Also remember, the longer you fix the bigger the penalties are if you withdraw.  My 5 year fix the penalty is 1 years interest.

Albermarle

I wish to set up my first Cash Isa account, I have never done this before, so I would appreciate some advice from some of you experts who have experience.

If you read through this forum for half an hour a day, then at the end of a week you would be much better informed.

Nijinsky

Thanks for all the replies, especially to eskbanker and GrubbyGirl_2.

I've just set up a Cash Isa with Moneybox and transferred a 20k deposit. I will see how it goes

elkiedee

If you have any more savings or are able to save more, you can put more money into an ISA in the next tax year starting from 6 April. Some ISAs, especially the fixed rate ones, won't accept more money and you'll have to open a new one, others you can add to.