I went into Barclays the other day to open a savings account where I could keep my money until I’d found the ISA I wanted. I’ve already got an ISA with Barclays, but it only pays me a paltry 0.5% so I’m on the lookout for a new one.
I asked the sales adviser if the bank offered any ISAs that accept transfers. His reply astonished me. He told me that although it didn’t have any ISAs accepting transfers, I shouldn’t worry – I could just take the money out of my current ISA, transfer it into my current account and then put it into a new ISA.
Now, taking money out of an ISA account means you instantly lose your tax-free status. Sure, you can regain it by putting the money into a new ISA account (if you haven’t already opened an ISA in that tax year), but it would count towards that year’s maximum allowance.
So, for example, if I withdrew the £3,000 I currently have in my ISA, put it into my current account and then opened a new ISA with the amount, I would only have £600 of my current cash ISA allowance left.
However, if I opted for an ISA that allows transfers, I could transfer the whole amount I’ve got in my ISA without eating into this year’s allowance at all. When I explained this to the sales adviser, he eventually admitted I was right.
This isn’t the first time I’ve been misadvised, and it makes me worry that many more people are being misled time and again into making the wrong financial decisions.
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