LGPS OAP & ISA ?

RULAST

xylophone said:

You can leave the old ISA as it is.

You can open a new ISA of your choice from 6 April.

With regard to the elderly relative, his bank might not offer the best rate on an ISA.

I connected with those suggested providers to ask more details plus APR today. I asked if you put 20k in and took out 5K, would you get the up to 20k interest still and yes they said minus the interest on the 5k whilst not in isa. I also asked my hearing that if you took 5k out above, some isas then don't allow interest subsequently on anything above 15k. Nobody could answer the last question. Thoughts 

xylophone

I also asked my hearing that if you took 5k out above, some isas then don't allow interest subsequently on anything above 15k. No

I just don't understand this.

A flexible ISA is just an ISA which permits you to pay in up to the maximum subscription in each tax year but to withdraw within the tax year then replace what you have withdrawn within the tax year.

Clearly you cannot earn interest on money withdrawn from the account.

Let us say that you deposit £20,000 in  a flex ISA 6 April 2024 The rate is 5% calculated daily and paid annually. 

You withdraw  £10,000 6 October 2024  then pay in £10,000 6 March 2025.

You have earned 5% on £20,000   April to October but from then until March you are earning 5% on £10,000.

From March  to April 5 when interest is paid you earn 5% on £20,000.

You need to make sure that you read the T&C of the account you choose.

RULAST

My apologies xylophone. I didn't get the key question to the providers correctly summarised earlier. Let me paste again here and will put the key aspect in BOLD TEXT if OK as below:-

I connected with those suggested providers to ask more details plus APR today. I asked if you put 20k in and took out 5K, THEN PUT 5K BACK IN LATER THAT YEAR, would you get the up to 20k interest still and yes they said minus the interest on the 5k whilst not in isa. I also asked my hearing that if you took 5k out above, THEN PUT 5K BACK IN LATER, IVE HEARD some isas then don't allow interest subsequently on anything above 15k EVEN THOUGH 5K PUT BACK. EFFECTIVELY TAKING OUT DID SOME DAMAGE EVEN IF 5K PUT BACK. THUS DAMAGE DONE. Nobody could answer the last question. IM SURE IVE READ THIS SOMEWHERE...THOUGHTS?

RULAST

xylophone said:

I also asked my hearing that if you took 5k out above, some isas then don't allow interest subsequently on anything above 15k. No

I just don't understand this.

A flexible ISA is just an ISA which permits you to pay in up to the maximum subscription in each tax year but to withdraw within the tax year then replace what you have withdrawn within the tax year.

Clearly you cannot earn interest on money withdrawn from the account.

Let us say that you deposit £20,000 in  a flex ISA 6 April 2024 The rate is 5% calculated daily and paid annually. 

You withdraw  £10,000 6 October 2024  then pay in £10,000 6 March 2025.

You have earned 5% on £20,000   April to October but from then until March you are earning 5% on £10,000.

From March  to April 5 when interest is paid you earn 5% on £20,000.

You need to make sure that you read the T&C of the account you choose.

What happens if you cannot afford (unexpected reason) to pay the 10k back that tax year?

Sarahspangles

I think you may be overthinking this. 

A Cash Individual Savings Account (ISA) is just a savings account with some extra rules in return for not getting taxed on the savings interest. 

You get interest on the amount you have in the account. Most banks/building societies will work out the interest you are earning on a daily basis, and pay it into the account a year later.

If you take some out and then put it back in later - assuming the account you choose allows this - then you won’t get as much interest.

RULAST

I'm still unsure what happens if I couldn't pay back all taken out (unforseen situations in life)

xylophone

I'm still unsure what happens if I couldn't pay back all taken out (unforseen situations in life)


You are not forced to pay it back, There would just be less in the ISA and thus less in your overall ISA savings.

In the following tax year, you can only contribute up to £20,000 to ISA (not £25,000).

RULAST

Many thanks xylophone. Will try find and nail down an ISA by Monday:-)

RULAST

Sarahspangles said:

I think you may be overthinking this. 

A Cash Individual Savings Account (ISA) is just a savings account with some extra rules in return for not getting taxed on the savings interest. 

You get interest on the amount you have in the account. Most banks/building societies will work out the interest you are earning on a daily basis, and pay it into the account a year later.

If you take some out and then put it back in later - assuming the account you choose allows this - then you won’t get as much interest.

Thanks Sarah. I'm slowly understanding and not over complicating 

RULAST

xylophone said:

I'm still unsure what happens if I couldn't pay back all taken out (unforseen situations in life)


You are not forced to pay it back, There would just be less in the ISA and thus less in your overall ISA savings.

In the following tax year, you can only contribute up to £20,000 to ISA (not £25,000).

Thinking overnight... bank isa gives 1.75%... reality is put 10k in over next 12 months... yes the isa better than bank 1.7% normal taxable saver account. As a pensioner on oap plus tiny pension it takes past 12570.. To move to isa away from normal bank to maybe 4.75 ISA doesn't give life changing tax savings. Along with ISA dos and donts, it might not be worth the hassle?. Thoughts