Caution - Investec Fixed Term Cash ISA

atcrodders

I started to apply for a 1 year fixed cash ISA, after it came up as one of the top rates in the weekly newsletter. During the online application it asked for a linked current account and stated all funds in and out of the ISA would have to use this linked account. That made me question how transfer request to another ISA provider at the end of the term would take place to preserve the ISA status.
I used online Chat to check the process. 

Long story short, it turned out, transfer of the original investment is done the normal way, ( new provider requests direct to Investec), BUT, the interest accrued would be paid to the linked current account, therefore loosing its ISA status. They tried to tell me this is in the ISA rules. Having checked the rules, interest can be added to your ISA fund and this interest does not form part of your ISA allowance for the tax year you receive it.
I “chatted” with two operators, both told me the same rule. Obviously Investec are making up their own rules, or their operators have been misinformed.
I won’t be using Investec. Their Chat (not UK based I would think) had difficulty understanding what I was asking. There is no telephonic customer service either.

dunstonh

During the online application it asked for a linked current account and stated all funds in and out of the ISA would have to use this linked account. 

Which is increasingly the case across all providers.

That made me question how transfer request to another ISA provider at the end of the term would take place to preserve the ISA status.

You would it do it the usual way. Transfers and withdrawals are two different things.

Obviously Investec are making up their own rules, or their operators have been misinformed.

Provider product terms do not have to match functionality allowed generically.

Long story short, it turned out, transfer of the original investment is done the normal way, ( new provider requests direct to Investec), BUT, the interest accrued would be paid to the linked current account, therefore loosing its ISA status. 

The Investec product page says different:

At the end of your fixed term, we'll get in touch to explain your options. By default, your balance will move into an Investec Save Instant Access Cash ISA, and any interest earned will be paid into your linked account. This keeps your balance within the ISA allowance and maintains its tax-free status. From there, you can choose to transfer your savings to another ISA provider if you prefer.

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Perhaps there has been some confusion in what you were asking. They have answered on the basis of you doing a withdrawal and not a transfer after maturity.

t0rt0ise

dunstonh said:

During the online application it asked for a linked current account and stated all funds in and out of the ISA would have to use this linked account. 

Which is increasingly the case across all providers.

That made me question how transfer request to another ISA provider at the end of the term would take place to preserve the ISA status.

You would it do it the usual way. Transfers and withdrawals are two different things.

Obviously Investec are making up their own rules, or their operators have been misinformed.

Provider product terms do not have to match functionality allowed generically.

Long story short, it turned out, transfer of the original investment is done the normal way, ( new provider requests direct to Investec), BUT, the interest accrued would be paid to the linked current account, therefore loosing its ISA status. 

The Investec product page says different:

At the end of your fixed term, we'll get in touch to explain your options. By default, your balance will move into an Investec Save Instant Access Cash ISA, and any interest earned will be paid into your linked account. This keeps your balance within the ISA allowance and maintains its tax-free status. From there, you can choose to transfer your savings to another ISA provider if you prefer.

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Perhaps there has been some confusion in what you were asking. They have answered on the basis of you doing a withdrawal and not a transfer after maturity.

What you quote from the product page seems to say exactly what the OP was told.. that the interest will be paid into the linked account rather than kept in the ISA. Useful to know.

refluxer

At the end of your fixed term, we'll get in touch to explain your options. By default, your balance will move into an Investec Save Instant Access Cash ISA, and any interest earned will be paid into your linked account. This keeps your balance within the ISA allowance and maintains its tax-free status. From there, you can choose to transfer your savings to another ISA provider if you prefer.

It seems that Investec think that either the interest counts towards the annual allowance or that you can only hold £20k in a cash ISA. Either way, it's concerning that they don't appear to know how ISAs work !

atcrodders

dunstonh 

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Perhaps there has been some confusion in what you were asking. They have answered on the basis of you doing a withdrawal and not a transfer after maturity.

I was quite clear in what I was asking in both chats.
 Maturity or after to transfer to another ISA account with different provider. Their answers also referred to maturity and transfer.