Transfer your Cash ISAs 3.3% easy acc, 4.25% fix on old AND new ISAs

A new tax year's just started, so every UK over-16 can save an extra £5,640 in a cash ISA, tax-free at up to 4.25%. Yet many old ISAs slash rates as low as 0.1% — if yours has, you can transfer to boost the interest 40x.

Consolidating old & new ISAs in one can ease future switching, and there's often little difference between top accounts which allow transfers, and those that don't. On £20,000 savings, some can gain £800/yr.

What is an ISA?

If you have savings, and aren't using an ISA (Individual Savings Account), then you're over-engorging the taxman's pocket. A cash ISA is simply an untaxed savings account. Get the top payer and it's a big interest boost.

You can deposit around £5,640 each tax year, from April to April (this limit rises by RPI inflation each April) and you should be trying to earn as much interest as possible.

As cash ISAs began back in 1999, it's now possible to have around £45,000 plus interest tucked away in them; but if you've not kept your eye on the rate, it's probably dropped lower than a limbo dancer. Luckily, you are free to switch your ISA money about, meaning it is possible to surf a wave of high, tax-free rates. That's as long as the account's rules allow transfers, and not all of them do.

For 11 years now whether on telly, radio or in m'book I've used the same analogy to explain ISAs. So why stop now? Here come the cakes! For a more detailed explanation of ISAs, including what happened to the old mini and maxi rules (don't worry it still includes the cakes) see the ISA Guide.

Why transfer your ISA?

Cash ISA rates move and change. The best buys a few years ago may be paltry players now. By transferring you can ride the wave of high rates, while keeping your cash in the tax-free wrapper. It's also possible to fix the rate or up the risk you're taking to get much higher potential returns by using different types of cash ISAs. More on that later.

You can also transfer money from 'Tessa-Only ISAs' (or Toisas). If you had a Tessa, the tax-free forerunners of ISAs, it's possible some of your cash was swept into a Toisa once the Tessa matured. If your cash is still there now, the top picks here will accept that transferred in too. Find out more in the Toisa section.

Any reason not to transfer?

You may be charged a penalty by your current provider for transferring out. This is becoming less common, but always check. A small penalty like 30 days' lost interest isn't such a big issue, but a higher fee effectively locks you in, as the gain from switching is gazumped by the transfer charge. If your ISA has a penalty for leaving, work out if you'll actually be better off by switching to the better interest rate.

How to transfer: the golden rule!

Transferring an ISA allowance is a technical process, not just like switching a normal savings account. Yet as long as you abide by the golden ISA transfers rule, it should go smoothly.

Never, ever, ever, ever withdraw money from a cash ISA!
You'll immediately lose all the tax benefits.

Instead speak to the new provider and fill out a transfer form. This will usually include a note you can send to your existing ISA company. Your new company should then sort it all out, including moving the money over for you, keeping your tax benefits intact.

The banks have agreed to a 15 working day guideline for the transfer to take place, so you should begin to receive interest within this time. If it goes much over 15 working days, it's worth complaining to the ISA provider.

The rules

Like ISAs themselves, the transfer rules are unnecessarily complicated. The two key ones are:

• Not all transfer types are allowed. You can transfer a cash ISA into a shares ISA, but not the other way around.
• Only past years' ISAs can be split. Current year's cash ISAs must be moved whole, but previous years' allowances may be split between different providers.

These rules are explained in full in the comprehensive ISA Guide.

ISA transfers FAQs

Cash ISA transfers are often an area of confusion. To help clear up fact from fiction, we've put together a quick Q&A.

How safe are your savings?

Bank collapse was once easy to dismiss, then the credit crunch and global market turmoil hit. The UK soon found itself bailing out Northern Rock, and the US authorities followed for even bigger bank Bear Stearns. These days every sensible saver should ask: is my money safe?

The answer's quite simple. Provided your money is in a UK regulated bank or building society account, it's protected under the Financial Services Compensation Scheme (FSCS). Its golden rule counts for ISAs too...

The first £85,000 per person, per financial institution is guaranteed.

Sadly, this is the simple face of savings safety; the exact rules are more complex involving how different banks are registered and what counts as a financial institution. For full info on the rules, see the detailed Are Your Savings Safe? guide.

How to maximise safety

Unless you've done very well in terms of earning interest, any cash ISA balance is unlikely to top this £85,000 limit, so there's likely to be no problem. If you have further savings in other accounts with the same bank or building society, then in the unlikely event that it went bust only the first £85,000 is fully guaranteed. For total peace of mind don't put more than this in any one institution; spread it around.

For those with very large amounts of savings (for example a house sale) this could lead to lots of accounts. Even if you've too much to stick to the £85,000 limit for each one, the general rule of not having all your eggs in one basket still works.

This guide and best buys

It's impossible to pick "which bank is in trouble?". We've seen great names of world banking like Goldman Sachs and Merrill Lynch in trouble. Therefore the only solution for this site is that we'll report the top rates regardless, alongside explaining any 'protection oddities'. So far, world governments have reacted to protect their banks and no savers have lost money, and it's likely (though not certain) this will continue.

The UK's top rate cash ISAs

Not all cash ISAs accept transfers in, especially the top paying ones. Their high rates are intended to grab headlines and new customers, but cost the banks as little as possible. Yet at the moment, most of the top paying cash ISAs do allow transfers in, which is great news!

As cash ISAs are generally 'variable rate', meaning they move both with the Bank of England base rate and for providers' own competitive reasons, always check every six months or so that your rate is still competitive. If not, transfer to a better payer. For alternatives to monitoring interest rates, read the Fixed Rate Accounts section.

Unless stated, all the accounts have full protection under the £85,000 per person, per institution rules. Though do check how institutions are linked and other notes in the safe savings guide.

Online applications

Check your local building society

On occasion a few small building societies may beat these with special deals for people in their locality, or for existing customers, so it's worth checking yours. All these rates are variable, meaning the providers can change the interest whenever they like. Therefore always monitor what yours pays and transfer again if it drops. For more options and alternatives, read the Top Cash ISAs article.

Inflation-beating ISA savings

An alternative to fixing is get an account that gives you a rate guarantee for a certain period. However, usually you have to lock cash away for up to five years, so only go for it if you are totally sure you won't need access. See full details of all the top accounts in the Inflation-Linked Savings guide.

Want to up the risk?

If you want to up the risk, and potential reward/loss, on your cash ISA money, the rules were changed in April 08 to make this easier as it is now possible to transfer your cash ISA into a shares ISA (but not the other way around). Read the full ISA Guide.

What about Toisas?

The Tessa only ISA, tongue twistingly known as a Toisa, was another special tax-free product. Old style TESSAs, the forerunner of the cash ISA, lasted for five years and then matured. If this occurred any time between 1999 and 2004, the TESSA automatically turned into a Toisa.

Since April 2008, all Toisas have become simple Cash ISAs, meaning all normal ISA rules apply. You can no longer add any more funds to an old Toisa, but if you have any money left in one, you can transfer it and up the rate, to any of the accounts above.

The Size of the Saving

The benefit from transferring the full £44,640 worth of cash ISAs

	Rate	Total Interest			Gain
		1 year	2 year	3 year
Dunfermline BS Direct Cash ISA	0.25%	£112	£224	£336	-
Santander Direct ISA	3.3%	£1473	£2,500	£4,056	£3,720
For ease of illustration calculations assume variable rates remain constant (or you transfer when rates drop)

If you have the full £44,640 (all 13 years worth) in Dunfermline BS's very poor 0.25% interest instant access cash ISA would earn just £336 interest over three years, compared to £4,056 with Santander.