Help with Santander closure of a fixed rate ISA account

Polistown

Hi there, newcomer to this forum .. I have a fixed rate 1 year ISA that will shortly expire (Oct 2025 and have been notified by Santander to make a choice of which ISA account products I would now like to re-invest with, or they will just shove it in one of their low interest paying accs instead .

I was thinking of closing the account down and taking all my investment and parking it elsewhere, Problem as I understand things, is that there will still be a 120 days penalty for closing the account down even after I have reached the end of the current term.. That means that I will owe them approx £1600 which seems excessive .. Unless I am misreading their terms, there seems to be no way out and I cannot transfer the money into my savings account or I would lose the "tax free" status and will instantly be subject to income tax- even though I would be able to have the freedom to access to these funds and spend them where I like. Has anybody been in the same situation and can perhaps give me some alternative options. I might add that I am looking for growth now,and have built up quite a good sum albeit it has taken bloody years but I am a careful and perhaps  an over cautious investor   Thanks in advance

BikingBud

Loss of interest would only be during the fixed rate period.

Upon maturity you should be able to transfer the ISA, including interest to maturity, to any other ISA of your choice and continue to enjoy the tax free protection.

If you close the account it will come out of the ISA wrapper and will be limited to how you can reinvest it.

Ayr_Rage

The default maturity option for fixed rate cash ISAs with just about all providers is for the product to become an instant access ISA at their lowest rate which means you can then transfer all your funds in there to any other ISA.

DO NOT close the ISA, transfer it.

If you want growth then look at Stocks and Shares ISAs, cash ISAs are pants.

eskbanker

Polistown said:

Unless I am misreading their terms, there seems to be no way out and I cannot transfer the money into my savings account or I would lose the "tax free" status and will instantly be subject to income tax

As above, yes, you are misreading their terms, but even if you did remove the money from the ISA wrapper, it's only interest subsequently earned on that money that would attract income tax (if exceeding the various allowances).

Transferring to another ISA is indeed the most obvious route, but make sure you ask your new ISA provider to initiate it....

flaneurs_lobster

I haven't checked but usually when any fixed term ISA product reaches term the default option, if nothing is actively selected, is an easy access ISA account, often with a poor interest rate. There would be no penalty for withdrawing (or more likely transfering) out of this account.

Are you sure this isn't an option? There ARE ISA products out there that will default into another fixed term ISA (with penalties to withdraw) but they are quite rare.

Looking at current Santander cash ISA offerings, they default on maturity to something called an ISA Saver (at 1% APR).

If you've got a copy of the terms there (with no personal details visible) post a copy/link and others can check.

EDIT, apologies, new posters can't add links or photos.

eskbanker

Ayr_Rage said:

If you want growth then look at Stocks and Shares ISAs, cash ISAs are pants.

That's quite a generalisation, especially in the absence of any meaningful information about OP's circumstances!

Ayr_Rage

eskbanker said:

Ayr_Rage said:

If you want growth then look at Stocks and Shares ISAs, cash ISAs are pants.

That's quite a generalisation, especially in the absence of any meaningful information about OP's circumstances!

The OP says they have built up "quite a good sum" and are looking for growth but that they are "perhaps an over cautious investor"

Staying in a cash ISA with the best around 4.4% and inflation at 3.8% means a rubbish real return and no opportunity for capital growth.

Time to be bolder and get into the stock market.

eskbanker

Ayr_Rage said:

eskbanker said:

Ayr_Rage said:

If you want growth then look at Stocks and Shares ISAs, cash ISAs are pants.

That's quite a generalisation, especially in the absence of any meaningful information about OP's circumstances!

The OP says they have built up "quite a good sum" and are looking for growth but that they are "perhaps an over cautious investor"

Staying in a cash ISA with the best around 4.4% and inflation at 3.8% means a rubbish real return and no opportunity for capital growth.

Time to be bolder and get into the stock market.

Investing rather than saving might be appropriate for at least some of the money but the point is that we know nothing of OP's timescales and objectives, so simply dismissing cash ISAs as being 'pants' is too broad a brush IMHO, even though it's undoubtedly true that cash is likely to be outperformed by S&S over the long term, albeit with the potential for shorter term volatility which may not suit those of a cautious nature....

Polistown

Firstly, a huge thank you to the very helpful thoughtful suggestions and comments from the forum members- - much appreciated . 
I have found out that I can UPGRADE my existing ISA:

Time for a change?

If you’ve got an ISA maturing with us, you can change it to an Easy Access ISA.

The change, including interest rate, will take immediate effect once processed.

Apparently, I have 28 days before the maturity date of my fixed rate to make my own personal choice of which ISA products I can select, however what I am not entirely clear about is this: Just say I decided to go for the Easy Access Isa (even though the interest is rate is poor), and say, I did it today- does that mean the changes occur straight away, or on the 9th Oct,when the old one officially expires- I'm thinking about the loss of the higher rate interest that would be otherwise protected if I waited till say the 8th October?   Thanks in advance for any clarification

flaneurs_lobster

Polistown said:

Firstly, a huge thank you to the very helpful thoughtful suggestions and comments from the forum members- - much appreciated . 
I have found out that I can UPGRADE my existing ISA:

Time for a change?

If you’ve got an ISA maturing with us, you can change it to an Easy Access ISA.

The change, including interest rate, will take immediate effect once processed.

Apparently, I have 28 days before the maturity date of my fixed rate to make my own personal choice of which ISA products I can select, however what I am not entirely clear about is this: Just say I decided to go for the Easy Access Isa (even though the interest is rate is poor), and say, I did it today- does that mean the changes occur straight away, or on the 9th Oct,when the old one officially expires- I'm thinking about the loss of the higher rate interest that would be otherwise protected if I waited till say the 8th October?   Thanks in advance for any clarification

The usual process is that you would fill out an application form for your new ISA, that would ask if you want to transfer in the proceeds from an existing ISA and also if you want to transfer at the maturity date. Your answer to both is Yes.

I'd hope that if you were logged into your account when applying then some of the application form will be pre-filled with your details (if you are sticking with Santander). 

PS not sure if I'd describe it as an "upgrade", the rate is almost certain to be less than before. 

PeskyBlunder

I have a similar Santander ISA - the Key Facts says this:

"If you don’t tell us what you want to do, we’ll transfer your
account to an ISA Saver. We’ll give you more details, including
your new interest rate, closer to the time."

I'm not going to do anything (as their "upgrade" suggestions are rubbish) and will transfer from their "ISA Saver" to another 1-year fixed rate ISA with another provider (looks like Vida at the moment - 4.31%).