Isa fixed rate period questions

snowmen

Hypothetical question (if you had the money) -
If you opened a 1 year fixed rate isa in say July for the maximum amount what are your options when the new tax year starts in April the following year?
Obviously you don't want to touch the money whilst it's in it's fixed rate period.
Is the best thing to wait until it matures in July and then open another isa and transfer this money and interest in?
Or is there something you can do in April? Maybe potentially starting another fixed rate isa which would have a different end date for the fixed rate period. Would this cause problems?

gravel_2

You can open a new ISA and fund it from 6 April with new money. If you transfer the July ISA before maturity you will most likely suffer interest penalty of 90-180 days interest.

Come July you can move the mature ISA into your new ISA (if it a) allows transfer and b) doesn't have a limited funding window) or you can open a further ISA and transfer the July one to that. 

As long as your new money subscriptions in 24/25 don't exceed £20k the system is pretty flexible.

snowmen

gravel_2 said:

You can open a new ISA and fund it from 6 April with new money. If you transfer the July ISA before maturity you will most likely suffer interest penalty of 90-180 days interest.

Come July you can move the mature ISA into your new ISA (if it a) allows transfer and b) doesn't have a limited funding window) or you can open a further ISA and transfer the July one to that. 

As long as your new money subscriptions in 24/25 don't exceed £20k the system is pretty flexible.

Thanks for the reply!
Interesting point about checking if the new isa has a limited funding window. 👍
If you didn't you could max out your allowance from year to year, and potentially have a lot of fixed rate isas maturing at different times of the year with nowhere tax-efficient for the money to transfer to once they have matured!

Slug62

I am totally confused. I opened an ISA last Sept, depositing £20K. It is fixed rate with a maturity date set for Sept this year. I want to open a new ISA of £20K this new financial year and then transfer the mature one in come September, so I have all the savings under one 'wrapper'. However, it isn't clear from some providers (eg, Zopa), whether this is allowed. Can anyone advise?

Slug62

Or do people who can max out their fixed rate cash ISAs create different accounts each year? 

eskbanker

Slug62 said:

I am totally confused. I opened an ISA last Sept, depositing £20K. It is fixed rate with a maturity date set for Sept this year. I want to open a new ISA of £20K this new financial year and then transfer the mature one in come September, so I have all the savings under one 'wrapper'. However, it isn't clear from some providers (eg, Zopa), whether this is allowed. Can anyone advise?

It depends on the terms of the account - some will allow transfers in, and some of those will only allow them within the first n days of opening the account.

Slug62 said:

Or do people who can max out their fixed rate cash ISAs create different accounts each year? 

Some do but there's no standard as such.

refluxer

snowmen said:

Interesting point about checking if the new isa has a limited funding window. 👍
If you didn't you could max out your allowance from year to year, and potentially have a lot of fixed rate isas maturing at different times of the year with nowhere tax-efficient for the money to transfer to once they have matured!

When a fixed rate ISA matures, you're free to transfer it to another ISA account. You can do this as many times during a single tax year as you like because these transfers don't count towards the current tax year's £20k ISA allowance.

As mentioned above, the main limitation you need to be aware of is that you don't pay more than £20k of new subscriptions in total into ISAs during the current tax year. 

refluxer

Slug62 said:

I am totally confused. I opened an ISA last Sept, depositing £20K. It is fixed rate with a maturity date set for Sept this year. I want to open a new ISA of £20K this new financial year and then transfer the mature one in come September, so I have all the savings under one 'wrapper'. However, it isn't clear from some providers (eg, Zopa), whether this is allowed. Can anyone advise?

As eskbanker mentioned, this is possible but only a very small number of ISA providers allow you to transfer-in beyond the initial funding window so your choice would be extremely limited - possibly to only one or two providers.

Zopa are not one of them AFAIK and if you're interested in the Zopa Smart ISA (or already have one opened), just be aware that Zopa consider all ISA 'pots' to be part of the same Smart ISA and they don't allow partial transfers out, which has fairly major implications if you're considering taking out fixed pots of different durations or a mixture of access and fixed pots. 

As far as combining your ISA allowances year after year is concerned, I prefer the flexibility of keeping them separate - it takes a bit more managing but the 'pros' outweigh this only 'con', IMO. If you are set on combining them though, the other option is to open an easy access cash ISA now and then combine them when your current fix matures. Just be sure to stay well under the FSCS limit in future years and allow headroom for interest.

snowmen

So as per my initial hypothetical question at the start of the thread, if i am at the point now of looking to open an isa for the new tax year whilst having a fix from last year not maturing until July, finding an isa witha funding window to allow the transfer of this isa when it matures is a challenge to say the least.
Depending on interest rates of cash and fixed isas, it might well put me off using fixed rate isas in the future - not a problem I thought I would uncover when I started this thread!

eskbanker

snowmen said:

So as per my initial hypothetical question at the start of the thread, if i am at the point now of looking to open an isa for the new tax year whilst having a fix from last year not maturing until July, finding an isa witha funding window to allow the transfer of this isa when it matures is a challenge to say the least.
Depending on interest rates of cash and fixed isas, it might well put me off using fixed rate isas in the future - not a problem I thought I would uncover when I started this thread!

Not sure I'm understanding the problem to be honest - if you have fixes maturing at different times then your range of options includes:

1. Leave them as separate by opening a new account for each one on maturity
2. Consolidate them by using an easy access product until all have matured, then fix at that point if desired
3. A refinement of option 2, use a flexible easy access ISA, moving funds out to better-paying taxable accounts while waiting for all to mature
4. Consolidate them by using a fixed rate product that has a long enough funding window

There's a thread all about option 4 at https://forums.moneysavingexpert.com/discussion/6517554/fixed-1yr-isas-where-you-can-pay-in-throughout-term

refluxer

snowmen said:

So as per my initial hypothetical question at the start of the thread, if i am at the point now of looking to open an isa for the new tax year whilst having a fix from last year not maturing until July, finding an isa with a funding window to allow the transfer of this isa when it matures is a challenge to say the least.

The answers above have pointed out that this isn't necessary but if you really are set on combining the ISA maturing in July with one you want to open now, then the options mentioned above are all available to you and don't require too much hassle.

The reason why you're finding this a challenge is because virtually all ISA providers don't allow transfer requests beyond the initial account funding window - this is usually a maximum of 30 days but can be less. This also includes some who do allow continued contributions through-out the duration of the fixed rate period in the form of new subscriptions, but still set a deadline for transfer-in requests (eg. 30 days for Barclays).

snowmen said:

Depending on interest rates of cash and fixed isas, it might well put me off using fixed rate isas in the future - not a problem I thought I would uncover when I started this thread!

Sticking to easy access cash ISAs will give you more flexibility but you will almost certainly lose out on rates in the long run, especially if interest rates fall as predicted.