Full ISA Guide Discussion Area

blueberrypie

rixius wrote: »

A quick question:

I maxed out the A&L ISA last year (£3,600).
SO, can I simply pay into the same account up to the new allowance this year (making £8,700)? And all this remains tax free?

Yes.

Am I correct in thinking that any monies I pay in now will be subject to the 3.2% interest rate?

It will all be at the same interest rate, so if you opened your account at 3.2%, it will be 3.2%.

The interest rate is guaranteed for one year, so if you opened your account more than a couple of weeks ago, it might be better to open a second account rather than add this year's allowance to the one you've already got.

rixius

blueberrypie wrote: »

Yes.



It will all be at the same interest rate, so if you opened your account at 3.2%, it will be 3.2%.

The interest rate is guaranteed for one year, so if you opened your account more than a couple of weeks ago, it might be better to open a second account rather than add this year's allowance to the one you've already got.

Right - So then it would make sense to leave my £3,600 in the original A&L account (to continue with the 3.5% interest for 12 months), and open up a new account with A&L for this year for the 3.2% interest rate. Will they allow that? To have two seperate accounts under the same name?

Thanks for your advice, it's much appreciated!

Lokolo

rixius wrote: »

Right - So then it would make sense to leave my £3,600 in the original A&L account (to continue with the 3.5% interest for 12 months), and open up a new account with A&L for this year for the 3.2% interest rate. Will they allow that? To have two seperate accounts under the same name?

Thanks for your advice, it's much appreciated!

Yes that is right.

Then when the 12 month bonus disappears you can transfer the money elsewhere.

Jonahmaul

Thanks to Spiggle & Blueberry Pie for clearing things up. Excellent answers. I have one further question that I'm hoping somebody could answer. I forsee that I will be able to save very little over the next 12 months (probably no more than £1500-£2000 including £800 already in instant access) & currently have approx £7700 in an ISA. As such would it be worth be suscribing to a higher rate paying ISA & just maxing it out straight away with what I have already (the £800 instant access & then the remaining from my current ISA) & then transferring the remaining ISA funds (£3400) to the highest that allows transfers in?

I'm unlikely to be able to make any further savings until after the summer due to a number of outlays that I need to make so would only have approx 6 months left of the ISA year at which point I could just find the best paying instant access account for any savings?

Thanks in advance for any help

Spiggle

Jonahmaul wrote: »

Thanks to Spiggle & Blueberry Pie for clearing things up. Excellent answers. I have one further question that I'm hoping somebody could answer. I forsee that I will be able to save very little over the next 12 months (probably no more than £1500-£2000 including £800 already in instant access) & currently have approx £7700 in an ISA. As such would it be worth be suscribing to a higher rate paying ISA & just maxing it out straight away with what I have already (the £800 instant access & then the remaining from my current ISA) & then transferring the remaining ISA funds (£3400) to the highest that allows transfers in?

I'm unlikely to be able to make any further savings until after the summer due to a number of outlays that I need to make so would only have approx 6 months left of the ISA year at which point I could just find the best paying instant access account for any savings?

Thanks in advance for any help

Hi Jonahmaul,

I'd love to be able to help but I'm good with the rules as opposed to the interest calculations!

If I understand you right, you want to withdraw £4300 from your mature ISA and add it to your £800 to subscribe to a 2010-2011 ISA paying the best rate. You then want to transfer the remainder in the mature ISA into a best paying ISA that allows transfers in. Have I got that right?

I'm going to presume I have! These calculations should really be checked and confirmed by you and others on here but the way I work it out is this:

a) £5100 (2010-2011 subscription) in a 3.2% for a whole 12 months will earn £163.20 in interest.
£3400 in a transfer ISA paying 2% (the A&L only pays 2.75% on balances over £9000) earns interest of £68.
£3400 in a transer ISA earning 2.75% earns interest of £93.50.
So you would have a total interest payment over 12 months of between £231.20 to £256.70.

b) If you transferred your total of matured ISA and subscribed the £800 you have you would earn £170 in interest on a 2% rate and £233.75 on a 2.75% rate.

Therefore, it appears that at a 2% transfer rate your method would earn more interest BUT you will have used up all your 2010-2011 allowance should your circumstances change later in the year.

At a 2.75% transfer rate you will have the best cumulative earned interest total using your method (but allowance used up).

Transferring the whole of the mature ISA (£7700) and subscribing the £800 to a 2.75% is marginally better (£2.55) than using your method and transferring £3400 to a 2% account.

The advantage if you transfer to a 2.75% and subscribe the £800 is that you would still have £4300 of allowance left to subscribe should your circumstances change later in the year.

Though if you use your method and transfer £3400 to a 2.75% then you would earn a cumulative £22.95 in interest more over the 12 months.

I think this is all correct but blueberrypie is very good with figures and can confirm or deny my calculations.

Ultimately the decision is yours and you must take into account variable rates especially with the transfer accounts. The A&L 3.2% can of course not go down and can only rise if base rates rise.

This is not advice (it is your decision and yours alone) and may prove to be the ramblings of a loon but good luck with your deliberations!

All the best,
Spigs

blueberrypie

Spiggle wrote: »

I think this is all correct but blueberrypie is very good with figures and can confirm or deny my calculations.

I am? Argh...the pressure! ;-)

Jonahmaul wrote: »

Thanks to Spiggle & Blueberry Pie for clearing things up. Excellent answers. I have one further question that I'm hoping somebody could answer. I forsee that I will be able to save very little over the next 12 months (probably no more than £1500-£2000 including £800 already in instant access) & currently have approx £7700 in an ISA. As such would it be worth be suscribing to a higher rate paying ISA & just maxing it out straight away with what I have already (the £800 instant access & then the remaining from my current ISA) & then transferring the remaining ISA funds (£3400) to the highest that allows transfers in?

Spiggle's conclusion is correct - withdrawing £4300 and depositing it plus your £800 into A&L at 3.2%, with the rest at 2.75% in Nationwide, does give marginally better interest than transferring the full £7700 to Nationwide and depositing £800 with A&L. But as mentioned, that does use up your full 10/11 allowance.

Does it *all* have to be instant access? Would it be acceptable to have some instant access funds and some in a fixed ISA?

I'm thinking that you could, for example, transfer your £7700 into a one-year fixed-rate ISA earning 3% (several available) and put £800 into A&L at 3.2% - that earns £256.60 - only 10 pence less than the withdraw/re-deposit option, but it leaves the rest of your 10/11 allowance intact, and you'd only have to deposit a few pounds (literally - less than a tenner) half-way through the tax-year to make that 10p up ;-)

Or transferring your £7700 into a two-year fix and putting £800 into A&L at 3.2% would increase your interest to £295.10, even if you deposited nothing further in this tax year. If you deposited anything further, it would then also be earning 3.2% (from the date of deposit, of course).

The figures could be balanced in a variety of ways, of course, and you could keep a bit more in instant access and a bit less in the fixed-rate - e.g. £1500 in an instant-access ISA (new £800 + previously-saved £700), with the remaining £7000 fixed-rate, which would leave £3600 of your 10/11 allowance available, and pay you £258 interest (at 3.2% and 3%) or £293 (at 3.2% and 3.5%).

I am not a financial advisor nor do I play one on television ;-)

dan10000

Hi - I have a simple ISA question which I know I should probably know...
I have an ISA with NatWest which I filled last year. I haven't added anything to it yet this financial year. If I open an ISA with Santander at a slightly higher rate can I contribute to both ISAs during this financial year as long as I don't exceed my £5100? Or am I right in thinking I can only contribute to one ISA?
My logic was to start contributing to Santander and then if they drop their rates below the NatWest, contribute there instead.
Thanks in advance.
Dan.

RayWolfe

You can only make contributions to the one current account. Don't forget you can transfer one or both of them if rates drop ... or for any other reason.

dan10000

Thanks Ray,
Last questions - so let's say I open the Santander one, put £500 in it and the rate drops in July to 1% - I can transfer it during this financial year right? And where to - to a new ISA or only to one of my other existing ISAs? I just thought you could only open one a year.
Thanks again,
Dan.

rb10

dan10000 wrote: »

Thanks Ray,
Last questions - so let's say I open the Santander one, put £500 in it and the rate drops in July to 1% - I can transfer it during this financial year right? And where to - to a new ISA or only to one of my other existing ISAs? I just thought you could only open one a year.
Thanks again,
Dan.

You can transfer that ISA elsewhere at any time.

The rule is that you can only pay new money into one ISA per tax year - but this does not include transfers, you can do this at any time.

So, if you now pay £500 into the Santander ISA, but then later in the year it becomes uncompetitive, you could ...
- open another ISA elsewhere, transfer the whole Santander account across to that one, and then continue paying in to the new account up to the limit of £5100
OR
- transfer it in full to your existing Natwest account, and then continue paying in until you've paid £5100 in this year.

Note that the Santander Flexible ISA is guaranteed not to drop below 3.2% for the first year, and will track any changes to the base rate. It is far more likely that you'll want to find a new home for the Natwest ISA than the Santander Flexible ISA.