Setting Up New 1Year Fixed ISA

eskbanker

DoneWorking said:

Albermarle said:

DoneWorking said:

Could I set up an easy access ISA with the same bank and have the monthly interest paid into this cash ISA

Or would I not be allowed to open up two ISAs in same year 

You have always been able to open up as many cash ISA's as you like per year. However you could only add new money to one ( transfers do not count). Since April you can now also add new money to more than one.

However most fixed rate ISA's do not allow you to add more money after the initial funding window, normally 15 to 30 days, although there are a handful of exceptions.

If you read through the forum, you will see all these issues discussed on a regular basis.

Thanks 
So what I'd like to do is set up a fixed 1 year cash ISA on monthly interest
Plus a easy access cash ISA with same bank
I would then like the monthly  interest from the fixed ISA  paid into the easy access ISA each month

I'd set up the fixed ISA with money transferred from another ISA which has just matured at a separate bank
Plus top up with £20k
And open the easy access with funds dropped in each month from the fixed ISA 

Is that all ok 

Thanks 

That's potentially quite complicated and will depend on the terms of the products concerned.

First question is whether or not the fixed term product allows interest to be paid out of the account monthly rather than simply being added to the balance, i.e. whether or not it's categorised as a withdrawal, with early access penalties.

If paying interest out is an option, then it may not be viable to do so into another ISA, so it may only be allowed to a non-ISA account.  That's not necessarily an issue as such, but it may result in it being classed as new money being paid in to the second ISA, i.e. counting towards your annual allowance, unless the fixed term account is a flexible one.

DoneWorking

Albermarle said:

DoneWorking said:

Albermarle said:

DoneWorking said:

Could I set up an easy access ISA with the same bank and have the monthly interest paid into this cash ISA

Or would I not be allowed to open up two ISAs in same year 

You have always been able to open up as many cash ISA's as you like per year. However you could only add new money to one ( transfers do not count). Since April you can now also add new money to more than one.

However most fixed rate ISA's do not allow you to add more money after the initial funding window, normally 15 to 30 days, although there are a handful of exceptions.

If you read through the forum, you will see all these issues discussed on a regular basis.

Thanks 
So what I'd like to do is set up a fixed 1 year cash ISA on monthly interest
Plus a easy access cash ISA with same bank
I would then like the monthly  interest from the fixed ISA  paid into the easy access ISA each month

I'd set up the fixed ISA with money transferred from another ISA which has just matured at a separate bank
Plus top up with £20k
And open the easy access with funds dropped in each month from the fixed ISA 

Is that all ok 

Thanks 

Probably not as the monthly interest will come out of the fixed ISA, and then will count as new money being put into the easy access ISA. As you will have already paid in £20K of new money, then you will  be going over the limit.
In any case the provider will probably struggle to organise it even if you were not up against the limit 

Better to put say £18K in the fixed rate ISA and have interest paid annually, and then £2k in the easy access ISA. 

Thanks
I just thought as the monthly interest was already within an ISA transferring it to an easy access ISA would be considered as a transferral and not new money 

I think on reflection I will just take out the interest and pay it into my nominated bank account for use to top up my day to day income 

eskbanker

DoneWorking said:
I just thought as the monthly interest was already within an ISA transferring it to an easy access ISA would be considered as a transferral and not new money

In principle you can use the ISA transfer process to move money from one ISA to another, and this doesn't affect your annual contribution allowance, but if the first account is a fixed term one with early access penalties then these will apply to a transfer as well as a withdrawal, so it wouldn't make financial sense to set up a series of monthly transfers even if the provider allowed it.

DoneWorking said:

I think on reflection I will just take out the interest and pay it into my nominated bank account for use to top up my day to day income 

In which case, as above, you need to ensure that you choose a product that permits interest to be paid out of the account, to avoid the early access penalties that would be applied otherwise....

DoneWorking

Thanks Eskbanker

If it's not possible to withdraw the interest each month from the Fixed ISA without penalty then what is the point of offering monthly interest 

refluxer

DoneWorking said:

If it's not possible to withdraw the interest each month from the Fixed ISA without penalty then what is the point of offering monthly interest 

I would imagine that most providers who offer a monthly interest option on fixed rate ISAs do give the option for it to be paid away but, as always, you need to read the account T&Cs to be sure.

Indeed - when selecting the monthly interest option on a Barclays fixed term ISA, having it paid away is the only option (you can't have it paid into the same account).

Don't forget that you won't be getting the headline AER rate when having monthly interest paid away, so it'll be the gross figure you need to pay attention to.