Plum cash isa offers lower interest if I Transferring an existing isa to them. Why?

tan-y

I am trying to move my cash ISA to gain better interest. However, I found that although Plum advertises its interest rate for its Plum cash isa at 4.35%, it then informed me that a  lower rate of 3.04% was paid if I was transferring in an existing isa to them. Why?...I'm staying with my existing provider if that's the case. But I don't understand the reasoning 🤷🏼‍♀️

FrugaiMacDugal

Yes, the Plum Cash ISA offers a significantly lower interest rate for transferring in an existing ISA compared to opening a new one, as transfers do not qualify for the introductory bonus rate.

Rate includes a Plum bonus of 1.31% AER (variable) if kept for 12 consecutive months and is for new customers only. The interest rate for ISA transfers is 3.04% AER (variable). Interest on our Cash ISA varies. This is the rate from 28/08/25. ISA rules and T&Cs apply. Plum is not a bank.

refluxer

Cash ISAs involve more admin (human input) for the provider than the non-ISA equivalents and ISA transfers involve more admin than ISAs just funded with current year subscriptions, so my guess would be that Plum have decided that the only way they're willing to deal with the hassle of transfers is if they pay a lower interest rate on the transferred funds, in order to off-set the extra work involved.

If you pay in any new subscriptions, you also have to keep the account open for a full year to get the bonus which may be a problem for anyone wanting to continually move their money around to get the best rate (presumably you'd need to leave £1 (or the minimum balance) in, in order to get the bonus payment in a year's time).

The only thing going for this account used to be the rate but now it's dropped, there are currently quite a few other ISA providers paying around the same rate but without those restrictions.

masonic

In short because they only want to pay a loss-leader rate on a limited amount of money per customer.

epm-84

For the current year you're limited to £20,000. If you can transfer previous year's subscriptions in you could transfer in significantly more. So I suppose one way of looking at it is they don't want to attract loads of accounts with £85,000 in them that they're paying a market leading interest rate on.

Another way of looking at is they don't want a load of applications from people who opened accounts with the likes of Trading212, and are now looking to transfer to a new provider, but who'll also transfer out in a few months time if another provider offers a more competitive rate.