ISA advice

Astraeus

I opened an ISA with NS&I in 2006-2007 with the full £3,000 allowance and have since added nothing more to it leaving me with approximately £3,300 in the account. Now I have a further £1,600 to put into my ISA - should I put the cheque for £1,600 into another ISA and then transfer across the balance from my NS&I? I'm aware that the A&L ISA is the best on the market but, as I'm not paying tax for another two years, would I be best off using standard savings accounts (with Kaupthing, for instance)?

Aegis

Not sure what the ISA table's looking like at the moment, but you should probably use the new money to open a new ISA, as you tend to get higher rates for new money than for transfers. As such, it might be best to open a new ISA for your £1600, then transfer the old ISA elsewhere, as the NS&I rate is currently appallingly bad!

Very useful thread: http://forums.moneysavingexpert.com/showthread.html?t=401374

Astraeus

Would I be allowed to open up two ISAs in a single year - using the Barclays Tax Haven ISA for the new money and, say, the Halifax Fixed Rate 4-Year ISA for the £3,000 transfer?

I'm assuming fixed rate bond ISAs are a good way to go with interest rates looking like moving down to ~4/4.5%?

Baldur

Astraeus wrote: »

Would I be allowed to open up two ISAs in a single year - using the Barclays Tax Haven ISA for the new money and, say, the Halifax Fixed Rate 4-Year ISA for the £3,000 transfer?

Yes, transfers don't count as 'opening' a new ISA.

Astraeus

Thanks. And you would recommend the Barclay's as a good ISA to have for new money? I tend to stick to the big banks for ISAs due to ease of access to branches and, in the long-term, the fact that having had ISAs with these banks may help me in securing mortgages, loans, credit etc.

Aegis

Astraeus wrote: »

Would I be allowed to open up two ISAs in a single year - using the Barclays Tax Haven ISA for the new money and, say, the Halifax Fixed Rate 4-Year ISA for the £3,000 transfer?

You certainly would, as long as you don't contribute new money to more than one ISA. There's a slight complication to that if you open a new ISA, contribute to it, then transfer it and contribute again, but in the simplest case it's fairly clear cut.

I'm assuming fixed rate bond ISAs are a good way to go with interest rates looking like moving down to ~4/4.5%?

It's always going to be a calculated risk. You need to decide for yourself if you think the interest rates are going to go down and stay down for the term of your ISA. If you're happy with your reasoning, then go for it.

The only think to consider is that for 4 years, you're looking at a very long term for cash savings. If you're looking for long term capital growth, you might consider a stocks and shares ISA (which you can now switch your cash ISA into without using an allowance) instead of tying in your savings without the prospect of fairly high growth (6% is ok, but is it enough for you to tie your cash to for 4 years?).

All in all, it comes down to what you're comfortable with.

Aegis

Astraeus wrote: »

Thanks. And you would recommend the Barclay's as a good ISA to have for new money? I tend to stick to the big banks for ISAs due to ease of access to branches and, in the long-term, the fact that having had ISAs with these banks may help me in securing mortgages, loans, credit etc.

Barclays were very slow opening my account last year, and were extremely unhelpful when it came to tracking down my rates, balance, etc. If you're happy with the idea of poor customer service, then their rate is currently still the best for new money if memory serves.

Astraeus

It's an interesting thought to keep the money in a shares ISA. The 4-year term has such a minimal increase in interest over non-bond ISAs that it makes it almost not worthwhile for only £3,500. If you don't mind me asking, Aegis, who have you got your cash ISA with as opposed to Barclays?

Aegis

Astraeus wrote: »

It's an interesting thought to keep the money in a shares ISA. The 4-year term has such a minimal increase in interest over non-bond ISAs that it makes it almost not worthwhile for only £3,500. If you don't mind me asking, Aegis, who have you got your cash ISA with as opposed to Barclays?

I currently have cash ISAs as follows:

2006/07 - NS&I, in the process of switching to Nationwide fixed
2007/08 - Barclays, in the process of switching to IceSave
2008/09 - Alliance & Leicester's 10% deal

I used Barclays and figured I'd stick with them until now because their rate stayed competitive throughout the year. Once I'd set up the ISA, it was a lot easier to live with.

Astraeus

Right. That 1-year Nationwide Fixed ISA looks attractive at 6.15% so that's another one to consider. Cahoot offer a fixed-rate six-month bond at 6.87% and a few others offer them at around the 6.7% mark - is there any advantage in holding the money in a less-interest bearing ISA than a fixed bond when I won't be paying tax on the savings?

Aegis

Astraeus wrote: »

Right. That 1-year Nationwide Fixed ISA looks attractive at 6.15% so that's another one to consider. Cahoot offer a fixed-rate six-month bond at 6.87% and a few others offer them at around the 6.7% mark - is there any advantage in holding the money in a less-interest bearing ISA than a fixed bond when I won't be paying tax on the savings?

There's no immediate benefit to you, but if you plan on becoming a taxpayer at some point, the benefit of having as much of your money as possible sheltered from the taxman is one that can't be overstated!