TRANSFER PART OF PREVIOUS YEARS ALLOWANCE AND YOU MAY LOSE THE FLEXIBILITY ON PART NOT TRANSFERRED.

Growingold

I hadn't realised this and initiated a part transfer of a previous years allowance to a new provider. Seeing my allowance from previous years disappear of the amount I hadn't transferred I googled it while waiting a reply from my bank and found this.

Yes, if you transfer part of your previous year's ISA to a new provider, you will lose the flexible rules on the remaining balance in your old ISA; essentially, the flexibility only applies to the account you withdraw from, and transferring a portion means you are effectively closing that part of the account, losing the flexible withdrawal option on the remaining funds there. 

So if anyone is thinking of doing this just be aware of the implications.

eskbanker

Where did you find that quote, and which provider are you referring to?  What are the amounts involved, i.e. how much was withdrawn flexibly, from what size of balance, and how much is being transferred?

surreysaver

How can a flexible ISA be partially flexible and partially not? Sounds like nonsense to me.

PRAISETHESUN

For flexible ISAs, if you make a withdrawal then the money you withdraw can only be paid back into that exact same ISA you initially withdrew from. If you make a withdrawal and then transfer the balance to another provider that is fine, but if you close the initial ISA then you will be unable to put the money back. Any deposits made into the new ISA, even if repaying a flexible withdrawal from your old ISA, will count towards your ISA limit. You need to keep the old ISA open in order to retain the flexible nature of the initial withdrawal.

surreysaver

So, it's written wrong. You retain the flexibility on the remaining funds, and the transferred funds are flexible (assuming your new ISA is also flexible). So if performing a transfer, you need to put any withdrawn funds back into an ISA they were withdrawn from if you wish to retain that flexibility after transfer.
So you've basically lost the flexibility on the withdrawn funds, not the remaining funds.

slinger2

See https://www.legislation.gov.uk/uksi/1998/1870/regulation/5DDB paragraph 6:

"On any transfer under regulation 21 the right of the account investor under paragraph (1) in relation to an account transferred is to cease in respect of a withdrawal of a cash amount from the account made before the transfer."

Paragraph 1 relates to the flexibility rule.

If only I could understand it.

slinger2

I'm thinking that "the right ... is to cease in respect of a withdrawal of a cash amount from the account made before the transfer" indicates that this paragraph specifically relates to withdrawals "made before the transfer".

surreysaver

It's been made so complicated. Just get rid of Cash ISAs and give everyone a tax free allowance of £10k a year in interest or something

Growingold

eskbanker said:

Where did you find that quote, and which provider are you referring to?  What are the amounts involved, i.e. how much was withdrawn flexibly, from what size of balance, and how much is being transferred?

Came up when I did a google search though didn't link to any particular website.  Did send the original ISA a query about this but as usual got a reply back skirting the question asked, they just mentioned current year allowance subscription. So restated my query to them.

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Yes, if you transfer part of your previous year's ISA, you will lose the flexible rules on the remaining balance in your old ISA account; transferring any portion of a flexible ISA to a new provider means you can no longer utilize the flexible withdrawal rules on the funds you leave behind in the original account. 

Key points to remember:

• Flexible ISA rules apply to the entire account:

  When you withdraw from a flexible ISA, you can only replace the withdrawn amount within the same tax year to maintain the flexible status; transferring part of it to a new provider breaks this rule for the remaining balance. 

Check with your provider:

Always confirm the transfer rules with your current and new ISA providers before making any moves. 

masonic

That's not a google search, it's an AI hallucination. It should not be trusted any more than a bloke down the pub who remembers reading something on the subject. It isn't how flexible ISAs work in reality.

Consider the following scenario:

• Start with £50k in a flexible cash ISA, £40k from previous years and £10k from current year.
• Then withdraw £20k. This results in £30k from previous years and the ability to make replacement subscriptions of £10k from previous years, followed by £10k from current year.
• Then partially transfer £20k. This results in £10k from previous years and the ability to make replacement subscriptions of £10k from previous years, followed by £10k from current year.
• Add £20k to original flexible cash ISA, add £10k to new cash ISA. This results in £30k in original flexible ISA (including £10k from current tax year), £30k in new ISA (including £10k from current year), allowance fully used and no rules broken.

If the google AI disagrees with that, then you should give it a stern telling off because it is wrong. Preferably in SHOUTY CAPS like this thread's title.

Where you would lose the ability to make the replacement subscriptions is if you transferred the previous year subscriptions in full (you'd lose the first £10k), or transferred the whole ISA in full (you'd lose the full £20k).

Growingold

i have learnt from this and just posted to make people aware of what could happen