Accumulative interest and ISAs help please.

jinkssick

Okay, I started a first ISA with NS&I last April, if I decide to get an ISA now with Icesave will I lose out in concern to accumulative interest.


If I keep my money in the NSI ISA and put another 3,600 will I not get interest on the interest of the interest etc?

If I now decide to put my new 3600 alone in Icesave will I lose interest that I would have got if I put this in the NSI?

I know its a basic question but its a little confusing for me.

CLAPTON

you can't get a new ISA until April 6th if you already have one for this tax year.

if you transfer an ISA to to new provider the interest will be transferred as well.

if you keep the current ISA (NS&I) then next year you will get interest on the interest exactly the same way that you will if it is transferred to a new ISA.
The only difference will be if the interest rates are different between the two a/cs

Paul_Herring

I started a first ISA with NS&I last April, if I decide to get an ISA now with Icesave will I lose out in concern to accumulative interest.

No - you'll get the interest you've accrued so far when the account is closed (~11 months worth.)

Lavendyr

jinkssick wrote: »

Okay, I started a first ISA with NS&I last April, if I decide to get an ISA now with Icesave will I lose out in concern to accumulative interest.

You can't just open another ISA with Icesave - you can only subscribe to one ISA in any tax year. So if you wanted to keep your NS&I ISA open and also have an Icesave ISA, you would have to wait until after 6th April and then apply for the Icesave ISA.

Alternatively you can do what's called a 'transfer out' from the NS&I ISA into the Icesave ISA. There is a prescribed procedure for this. Basically all you have to do is tell Icesave, when you apply, that you want to fund the account with a 'transfer in' - then download a form from the Icesave website, fill it out with your old ISA details (i.e. your NS&I account details), and send it off to Icesave. They will then send your request to NS&I, who will carry out a series of checks, and will then send your ISA funds, including any interest up to the date of transfer, in the form of a cheque to Icesave.

I have just done this myself and it has taken a total of 19 days, of which only two days were without interest (applied for Icesave on 17th Jan, money left NS&I on 2nd Feb, money showed in Icesave account dated 4th Feb).

jinkssick wrote: »

If I keep my money in the NSI ISA and put another 3,600 will I not get interest on the interest of the interest etc?

Compound interest is a difficult one to grasp, but essentially, no, you don't lose out by having two separate ISAs. Consider it this way:

Year 1:
ISA 1: £3000 - at 6% you gain £180
Total interest = £180

Year 2:
ISA 1: £3180 - at 6% you gain £190.80
ISA 2: £3000 - at 6% you gain £180
Total interest = £370.80

Year 3:
ISA 1: £3370.80 - at 6% you gain £202.20
ISA 2: £3180.00 - at 6% you gain £190.80
ISA 3: £3000.00 - at 6% you gain £180
Total interest = £573

versus:
Year 1:
ISA 1: £3000 - at 6% you gain £180
Total interest = £180

Year 2:
ISA 1: £6180 - at 6% you gain £370.80
Total interest = £370.80

Year 3:
ISA 1: £9550.80 - at 6% you gain £573.05
Total interest = £573.05

And so on. Do you see? Of course, that's assuming all interest rates are the same but you get the picture.