First ever ISA just finished - new lower Interest rate today - what do I do please?

Just_A_Dad

Hi There,

Sorry completely new at this.

2023-2024 opened up my first ISA (Santander) fixed 1 year 4.15% ISA and managed to put in 10,830.57 before it closed last summer.

Today (1st May) this ISA rate dropped to 1.2% and still only has the 10,830.57 in it
Santander says tomorrow that I will be given the Interest (I presume the one year at 4.15%

What do I do then?
What are my options?

I presume I can do nothing - and only get 1.2% interest on this for the next 12 months
or
I can transfer to another Santander product (1.7% easy access ISA or a 3.75% fixed one year)
or
I can transfer out to any other ISA from another company at a higher rate?
(If i do this one - I have to use a transfer service right?)
or  
can I with draw the 10,830 plus interest to my bank account - and then put this all in a new ISA (that might give a higher rate of interest for non-transfer in?)

Any pearls of wisdom for me please?

TIA

TheMilkmansDad

Someone more clued up will come along soon but DO NOT WITHDRAW. Open up a new ISA that allows transfers in with a better interest rate and transfer over.

ColdIron

Transfer to a better rate

Fixed rate

https://moneyfactscompare.co.uk/isa/fixed-rate-isas/?quick-links-first=false

Easy access

https://moneyfactscompare.co.uk/isa/easy-access-cash-isas/?quick-links-first=false

Beddie

To do a transfer you open a new ISA somewhere else and then, as part of the opening process, transfer the old ISA to it. The new provider will ask for old ISA account details and handle the transfer. Takes up to 2 weeks, but usually much quicker.

Catplan

Just_A_Dad said:

Hi There,

Sorry completely new at this.

2023-2024 opened up my first ISA (Santander) fixed 1 year 4.15% ISA and managed to put in 10,830.57 before it closed last summer.

Today (1st May) this ISA rate dropped to 1.2% and still only has the 10,830.57 in it
Santander says tomorrow that I will be given the Interest (I presume the one year at 4.15%

What do I do then?
What are my options?

I presume I can do nothing - and only get 1.2% interest on this for the next 12 months - you can do this but wouldn’t recommend 
or
I can transfer to another Santander product (1.7% easy access ISA or a 3.75% fixed one year) - you can do this but wouldn’t recommend 
or
I can transfer out to any other ISA from another company at a higher rate? - you can do this and should use transfer process
(If i do this one - I have to use a transfer service right?) - you should use the transfer to protect ISA wrapper / avoid it being this year’s allowance 
or  
can I with draw the 10,830 plus interest to my bank account - and then put this all in a new ISA (that might give a higher rate of interest for non-transfer in?) - you could do this, wouldn’t recommend. Currently the 10,830 is last years subscription, you have 20k this year, if you withdraw to bank account and then put in ISA it would count as this years subscription. If you transfer you still have this years total subscription available to put into an ISA.



Any pearls of wisdom for me please?

TIA

In short transfer to the highest rate ISA that suits your needs, be that fixed / variable etc…

XzavierWalnut

It is a simple and quick process to transfer to a new provider. I have done it several times each year since ISA's started and never had a problem.
Just fill in the details on the new providers website or visit their bank, and they do all the work.

soulsaver

Just_A_Dad said:

Hi There,

Sorry completely new at this.

2023-2024 opened up my first ISA (Santander) fixed 1 year 4.15% ISA and managed to put in 10,830.57 before it closed last summer.

Today (1st May) this ISA rate dropped to 1.2% and still only has the 10,830.57 in it
Santander says tomorrow that I will be given the Interest (I presume the one year at 4.15%

What do I do then?
What are my options?

I presume I can do nothing - and only get 1.2% interest on this for the next 12 months
or
I can transfer to another Santander product (1.7% easy access ISA or a 3.75% fixed one year)
or
I can transfer out to any other ISA from another company at a higher rate?
(If i do this one - I have to use a transfer service right?)
or  
can I with draw the 10,830 plus interest to my bank account - and then put this all in a new ISA (that might give a higher rate of interest for non-transfer in?)

Any pearls of wisdom for me please?

TIA

If you are certain you weren't going to use more than  c £8.5k (£20k - 10830+int) of your 2024/25 £20k allowance, you wouldn't lose by just withdrawing the funds and putting them in another ISA.

So then you can get up to your 24/25  £20k  into any ISA, including those that do not allow transfers-in. e.g. 1 or 2 year 4.6% fix ISA with Bath BS which allows you to top up as funds allow* throughout the term, rather than the more usual 14 to 30 day funding window. 

*Within the usual ISA limits, obviously.

Fixed Rate ISA | Personal Savings - Bath Building Society

eta clarity

jimjames

TheMilkmansDad said:

Someone more clued up will come along soon but DO NOT WITHDRAW. Open up a new ISA that allows transfers in with a better interest rate and transfer over.

In general that's good advice but if the OP only has £10k and no plans to pay in more than that this year then there won't be an issue withdrawing and paying in to an ISA that doesn't allow transfers (like Chip)

Reed_Richards

jimjames said:

TheMilkmansDad said:

Someone more clued up will come along soon but DO NOT WITHDRAW. Open up a new ISA that allows transfers in with a better interest rate and transfer over.

In general that's good advice but if the OP only has £10k and no plans to pay in more than that this year then there won't be an issue withdrawing and paying in to an ISA that doesn't allow transfers (like Chip)

Ah, but who can predict the future?  Maybe the OP will win the lottery?  Or receive a legacy?    

DavidAC

XzavierWalnut said:

It is a simple and quick process to transfer to a new provider. I have done it several times each year since ISA's started and never had a problem.
Just fill in the details on the new providers website or visit their bank, and they do all the work.

My experience has been the opposite. Transfer from YBS to Virgin being the worst. The electronic transfer between them kept being rejected because VM said YBS had not entered a field on the electronic form correctly, YBS said they had. They concluded their systems were incompatible and did the transfer by post. Took me literally 20+ phone calls over 6 weeks to get them to sort it. At least they back dated the interest.

I find you generally loose nearly half of the 20% tax benefit with ISA rates being lower than non ISA's. Then you loose a bit more stuck on a low rate waiting for a transfer to a better rate to go through.

Beddie

To counter the above comment, I transferred an ISA from Yorkshire BS to Virgin Money this year and it was done in 3 days. Everyone tells you their problems, but you rarely hear about the 99% of successes.