Best cash ISAs for transfers
Want to transfer your existing ISA savings but don't know which provider will accept your money? Moneywise looks at the top accounts accepting transfers.
Savers who have used their cash ISA allowance every year since their launch in 1999 could be £3,000 better off – but many ISA savers are losing out because they have fail to move their money into a new account regularly.
ISA rules only allow savers to save a certain amount of money tax-free each tax year – the current cash ISA allowance for 2009/10 is £3,600, or £5,100 if you are aged over 50. However, many cash ISA providers allow you to move money from previous ISAs into your new account.
This won’t affect your current ISA allowance – and is a good way to ensure your savings from previous tax years maintain their tax-free status but continue to earn a decent rate of interest.
When you consider that the average cash ISA currently pays just 0.47%, it makes a lot of sense to move your ISAs from previous tax years and keep your savings altogether.
Two of the top cash ISAs currently on the market - Santander's 3.5% deal and Barclays 3.1% Golden ISA - don’t accept transfers in.
So what are your other options?
The best rate is currently offered by Yorkshire Bank. It pays a fixed rate of 5% on deposits of £2,000 plus.
However there is a catch - this account is fixed for five years so you'll have to lock your money away until 2015. During that time, interest rates are expected to rise, so you could miss out.
Leeds Building Society also offers a five-year fixed cash ISA - this time paying 4.6% AER on deposits of £1 plus. Or Birmingham Midshires pays 4.55% and Principality pays 4.5% - both for five years on deposits of £500 and £3,600 respectively.
In terms of one-year fixed rates, The Post Office pays 3% AER on deposits from £500.
If a fixed rate isn't for you, then you might want to consider Newcastle Building Society's 120-day notice account. This pays 3% on deposits of £500, including a bonus rate of 1% for 12 months.
Buckingham Building Society pays 2.86% AER on its 180-day notice account, this time on deposits of £100 plus.
If giving notice isn't up your street, then consider Nationwide's 2.75% variable-rate ISA, which includes a bonus rate of 1% for a year. You can open this account from as little as £1 deposit.
Both Cheltenham & Gloucester and Birmingham Midshires both pay 2.7% AER on deposits from £1 and £500 respectively. Both these accounts include bonus rates, so remember to switch once these run out.
A savings account on which the account holder is required to give a period of notice before making a withdrawal or face a penalty, usually a loss of a specific number of days’ interest or pay a fee. Notice periods of 30, 60 or 90 days are common. These accounts usually pay higher than average interest rates and require large initial deposits (£1,000 minimum) so the notice period and penalties are there to discourage withdrawals. Some of these accounts will only allow a certain number of withdrawals a year.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.