Virgin Money regular saver + flexible ISA

PRAISETHESUN

If I'm correct, my understanding of the issue is as such:

OP has money in a flexible Chip ISA. They want to maximise their contributions in FY24-25. To to this they need to withdraw from their VM non-ISA savings. As the VM savings has a limit on monthly deposits (fairly standard for RS accounts) they are asking if the terms of the VM savings account allow for any withdrawals to be repaid, or if they will still be limited to the monthly deposit cap - this part of the question I am unsure about. It's usually fairly standard that you won't be able to replace the full amount withdrawn in these circumstances.

Completely separately, in FY25-26 they will then make a withdrawal from their Chip flexible ISA. In this instance, as the ISA is flexible they will be allowed to return any withdrawn funds back into this ISA before the end of FY25-26. Any withdrawn funds MUST go back into the exact same ISA account they were withdrawn from. A £30k withdrawal would be able to be replaced, in addition to £20k of new money. If the ISA is closed or transferred away, then they will lose their ability to replace the flexibly withdrawn amount, and any deposits back into another ISA will count towards their FY25-26 limit. So in their scenario where they flexibly withdrew £30k, they would then only be able to re-deposit £20k of this money.

Also as an aside, I fear OP might also be misunderstanding how RS accounts work. Interest is accrued daily for the money in the account. Having a balance of £2k at the end of the year doesn't mean that they will be paid £200 interest. You can only get interest paid for money in the account, and the total £2k money wasn't in the account for a full year.

jimjames

fromscratch said:

As I dripfeed from my flexible cash ISA, I want to retain the largest ISA allowance I can for  or 25/26. So I plan to empty some savings accounts (not just the Virgin one) to bring my balance up in the ISA just before April 5th and then put it back into taxable savings with higher rates than my ISA on April 6th. That way I will have more in the ISA for 24/25 and because I remove it in 25/26 I will have a bigger available allowance for 25/26, say 30k instead of 20k

I can certainly see the logic of what you are proposing but for the sake of £2000 I can't see it's worth it when you are then losing the £2000 from VM Reg Saver at 10%. If you have £30k like your example then it might be beneficial. Are you expecting a big increase in savings balance during the next FY as a reason for doing this? 

fromscratch

BikingBud said:

Nope you've baffled me.

Yeh I think we are not talking about the same thing at all?

This is how it is. I have a flexible Chip ISA, so I can take out any funds at all from it in one year so long as I put them all back in the same tax year. Keeping it really simple if I have £40k altogether in there, I can take out 40k and replace 40k in the same tax year (not only 20k like the normal ISA allowance)- the next year I would have the potential to build up to 60k and take out 60k so long as I did it all in the same tax year.

But if I only have say £35k in there at the end of the tax year, ii would lose £5k of the total ISA allowance. The next tax year I would only be able to take out and put in 35+20k=55k instead of 60k.

So what I am trying to do is take money from taxable accounts to get the ISA to its limit. Then after the tax year refreshes, I will put money back into taxable accounts because they pay more interest than the ISA. 

Th VM regular saver has not yet matured, think that is in August, so I want to keep it running at full capacity. But if I could take it out for a day or 2 and then put it back in, I would have a good amount in the saver and a big ISA allowance. 

Just FYI I have confirmed these rules with Chip. The ONLY part I am trying to clarify is VM who state, 

"The maximum balance you can earn interest on increases each month by £250. If you do not manage to save your full £250 in any month, you can pay more in the next or future months"

So it looks like the balance you can earn interest on increases per month, so in theory you could just not fund it until month 6 and then add 6x250. 

fromscratch

PRAISETHESUN said:

If I'm correct, my understanding of the issue is as such:

OP has money in a flexible Chip ISA. They want to maximise their contributions in FY24-25. To to this they need to withdraw from their VM non-ISA savings. As the VM savings has a limit on monthly deposits (fairly standard for RS accounts) they are asking if the terms of the VM savings account allow for any withdrawals to be repaid, or if they will still be limited to the monthly deposit cap - this part of the question I am unsure about. It's usually fairly standard that you won't be able to replace the full amount withdrawn in these circumstances.

Completely separately, in FY25-26 they will then make a withdrawal from their Chip flexible ISA. In this instance, as the ISA is flexible they will be allowed to return any withdrawn funds back into this ISA before the end of FY25-26. Any withdrawn funds MUST go back into the exact same ISA account they were withdrawn from. A £30k withdrawal would be able to be replaced, in addition to £20k of new money. If the ISA is closed or transferred away, then they will lose their ability to replace the flexibly withdrawn amount, and any deposits back into another ISA will count towards their FY25-26 limit. So in their scenario where they flexibly withdrew £30k, they would then only be able to re-deposit £20k of this money.

Also as an aside, I fear OP might also be misunderstanding how RS accounts work. Interest is accrued daily for the money in the account. Having a balance of £2k at the end of the year doesn't mean that they will be paid £200 interest. You can only get interest paid for money in the account, and the total £2k money wasn't in the account for a full year.

Thanks, you are correct what I mean about the ISA. Regarding regular savers, I do understand them. They all have different T&Cs, some you can't replace any money you took out in the same month because you'll have used the allowance, others say you can take money out but only replace up to one month's money that month. But Virgins T&Cs appeared to be different to either of those 2 scenarios and so I wanted to check I was correct in my understanding.

So I just called Virgin Money and they have confirmed
1. I can take out the full balance
2. I can replace the full balance a few days later
3. As soon as I replace the balance I will receive the 10% interest on the full balance
4. I will only miss out on interest for the 2 days it is removed from the account because there won't be anything to pay interest on.

This is because they pay interest on a cumulative monthly allowance, i.e. they would pay 10% interest on £750 if you had had the account open for 3 months and you funded it with £750.

fromscratch

jimjames said:

I can certainly see the logic of what you are proposing but for the sake of £2000 I can't see it's worth it when you are then losing the £2000 from VM Reg Saver at 10%. If you have £30k like your example then it might be beneficial. Are you expecting a big increase in savings balance during the next FY as a reason for doing this? 

Yes, I am expecting a big increase in savings in the next tax year because I am going to earn more, and some other taxable savings accounts will be maturing throughout the year. 

BikingBud

fromscratch said:

BikingBud said:

Nope you've baffled me.

Yeh I think we are not talking about the same thing at all?

This is how it is. I have a flexible Chip ISA, so I can take out any funds at all from it in one year so long as I put them all back in the same tax year. Keeping it really simple if I have £40k altogether in there, I can take out 40k and replace 40k in the same tax year (not only 20k like the normal ISA allowance)- the next year I would have the potential to build up to 60k and take out 60k so long as I did it all in the same tax year.

But if I only have say £35k in there at the end of the tax year, ii would lose £5k of the total ISA allowance. The next tax year I would only be able to take out and put in 35+20k=55k instead of 60k.

So what I am trying to do is take money from taxable accounts to get the ISA to its limit. Then after the tax year refreshes, I will put money back into taxable accounts because they pay more interest than the ISA. 

Th VM regular saver has not yet matured, think that is in August, so I want to keep it running at full capacity. But if I could take it out for a day or 2 and then put it back in, I would have a good amount in the saver and a big ISA allowance. 

Just FYI I have confirmed these rules with Chip. The ONLY part I am trying to clarify is VM who state, 

"The maximum balance you can earn interest on increases each month by £250. If you do not manage to save your full £250 in any month, you can pay more in the next or future months"

So it looks like the balance you can earn interest on increases per month, so in theory you could just not fund it until month 6 and then add 6x250. 

So how much interest do you expect to accrue from this "scheme" that makes it worthwhile removing all your cash from ISAs? Given your plan in bold @10% I make it about £120

Whereas just starting at month 1 and paying in according to the schedule you will have ~£167 in interest so you might be losing ~£50 per year🤷🏼‍♂️

As I understand:

• You put money into an ISA it can stay there, 20k per year.
• You accrue interest within the ISA wrapper it can stay there and compound up.
• You take money out of the flexible ISA then interest accrued elsewhere will be subject to tax.
• You cannot put interest from elsewhere back into the ISA unless it is within the 20k annual allowance.
• That interest will be have already been subject to tax.
• Monthly savers are loss leaders with artificially high interest rates to entice customers in with the expectation that saver lethargy leaves it where it is when they cut the rate.

Can you put some figures down so we can see the wizardry as I'm currently having great difficulty seeing the benefits. But always happy to be educated1

Why is nobody else doing this?

Maybe everyone else and I am really missing out on something?

fromscratch

BikingBud said:

Can you put some figures down so we can see the wizardry as I'm currently having great difficulty seeing the benefits. But always happy to be educated1

Why is nobody else doing this?

Maybe everyone else and I am really missing out on something?

I'm not going to put figures down for you but yes I do think you're missing something. You have whatever amount you have in a flexible ISA paying the highest interest you can find. Every month you withdraw money to put into higher interest regular savers. So you start with a big balance in the ISA and remove it monthly to earn more interest on that amount. When the savers mature, you bung everything back in the ISA, open new regular savers and start again- clearly I don't have the saver lethargy you worry about.

You will earn taxable interest on the money in taxable accounts, sure. If it bothers you then keep it under the £500/£1000 personal allowance. 

You ask why is nobody else doing this? Plenty of people are doing this and Martin Lewis recommends drip feeding in one of the articles on regular savers. 

I think you might find it confusing because of the flexible ISA part. Because I don't always have only the £20k yearly allowance to play with, I could have any multiple of 20k to take in and out at will so long as I do it in the same tax year. This is why VM t&cs were important, as I want to increase the overall flexible ISA allowance that I am able to use. I don't want it to be sucked away as the new tax year comes along.