Don’t stay with her once the magic has gone- dump your ISA now!

sweet young thing or old boiler?

You know how it is. She gives you the come on, desperate for your attention the whole of March, flashing you a sneaky bit of frilly good rate and you fall for it. And once you have invested your package into her, soon after 5 April you discover you have been left with an old boiler of an ISA, paying a really crap rate of interest.

Well, it’s that time of year again, and all the ISA providers have got their best girls on show in the hope that you will go with them, and be too lazy to take it out again.

Comparison site Moneyfacts lists the best Cash ISA rates as being upwards of 3% per annum, with the best buy being the AA’s online cash ISA. Yes, I thought they fixed cars too.  However, if we look a little more closely, the AA’s 3.35% rate includes a 1.80% 12 month bonus and Santander’s 3.30% includes a whopping 2.30% bonus. In fact, none of the top ten Cash ISA rates are free from a temporary or discretionary bonus amount. These ladies aren’t looking so fit in the cold light of day, are they?

Of course, far be it from us to dissuade you from using the banks and building society’s own tease tactics for your own gain, and by all means take out the highest paying cash ISA you can find, after all, it is tax free. However, just remember to transfer your ISA after the honeymoon period ends.

But beware, not all ISA rates are available for transfers in. Of course they aren’t, that wouldn’t be in the banks’ favour now would it. However, according to the Moneyfacts top ten Cash ISA rates, the best rate available for transfer is the Nationwide e-ISA at 3.10% (bonus of 1.35%). You could get rates as high as 4.5% or even 5% though, if you are willing to tie your cash up for 4 or 5 years.

But whatever you do, DO NOT go and withdraw all your lovely ISA cash from an old boiler to reinvest in this year’s hot new model. This would mean it becomes normal cash instead of ISA cash. This is Not A Good Thing. Instead, you need to complete an ISA transfer form, give it to the new girl, and she will laugh in the face of the boiler while stealing all your money from her purse.

Remember, the Cash ISA limit is £5,100 for 2010/11 (which ends on 5 April 2011), so if you have the cash to welly in now, go do it- you can do another lot in the12 months from 6 April. And if you are thinking that even 3.35% doesn’t seem a desperately generous rate, you might be right, but it is a darn site more generous than the effective rate of 2.68% for a basic rate taxpayer or 2.01% for a higher rate taxpayer is it was non-ISA (ie taxable) cash savings.

Now go...


  • Tim
    Not all ISAs allow transfers. Many of the better ones won't allow transfers in to stop you benefiting from their good rates with old ISA cash (which can be substantial amounts). Some won't even let you transfer out I think. FYI the £5,100 limit applies only to how much you can *invest* in that year. Existing ISA cash can be transferred around with (I believe) no limits. Also, with cash I believe you can only invest in that year with one provider. Don't forget your stocks & shares allowance above cash. And finally, look at rates for non-ISA savings. The rates offered net tax by some taxable savings accounts may negate the savings you make in not paying tax on many of the pitiful ISA accounts.
  • Mr S.
    Does anyone know if it is possible to transfer cash from a dodgy ISA to a better ISA with the same supplier?
  • Retire 9.
    For share ISA the limit is £10200, but obviously only for the advanced / foolhardy (delete as appropriate) investor.
  • brian
    that picture is annoying, I can only see the old hag!
  • Larry
    @Mr Shrubber Yes - if the provider in question allows that. I did this once from a cash isa to an online-only cash isa for a slightly better rate.
  • Scrotum S.
    @brian the hags mouth is the tarts necklace and the hags nose is the tarts chin and cheek on her left side as she looks demurely away. Hags left eye becomes ear ring. HTH HAND GTFO

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