Transfer your Cash ISAs

Providers want us to think once a cash ISA is open, it's a done deal, allowing them to drop interest rates in safety. Yet you’ve a right to transfer existing cash ISA (or Toisas) to another provider; the trick is finding one that will let you. This step-by-step guide will show you where to put your cash for maximum gain.

• What is an ISA?
• Why transfer your ISA?
• How safe are your savings?
• Best Buy: Top Cash ISAs
• Instant Access Cash ISAs
• Fixed Rate Cash ISAs
• Shares ISAs
• What about Toisas?
• The Size of the Saving

Transfer your ISA cake

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 up to £3,600 each tax year, from April to April, and you should be trying to earn as much interest as possible. This limit rose on 6 October to £5,100 for anyone 50 or over by 5 April 2010, and everyone will get the new annual limit from 6 April 2010.

As Cash ISAs began back in 1999, it's now possible to have £34,200 plus interest tucked away in them; yet the likelihood is that if you've not kept your eye on the rate, it's 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, as long as the account's rules allow transfers, and not all of them do.

For seven 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 my 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 in tact. The Inland Revenue has set a 30 limit for the transfer to take place, although this is 30 days for your old provider to carry out the transfer, and not 30 days for your new provider to put the transfer in motion.

The rules

• Not all transfer types are allowed. You can transfer a cash ISA into a shares ISA, but not the other way around.
  
• Only past year's 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.

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. This means these days every sensible saver should ask “is my money safe?.

The answer is 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) and its golden rule counts for ISAs too...

The first £50,000 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 read the full Are My 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 £50,000 limit, so there's likely to be no problem. Yet if you have further savings in other accounts with the same bank or building society, then in the unlikely even that it went bust only the first £50,000 in fully guaranteed, so 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 £50,000 limit for each one, the general rule of not having all your eggs in one basket still works. For more info see the how to get 100% safety section of the savings safety guide.

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 its likely (though not certain) that 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 £50,000 per person, per institution rules. Though do check how institutions are linked and other notes in the safe savings guide.

The Top Rate Accounts

• First Direct 3% Online, guaranteed rate. Accepts transfers

  The top rate's with First Direct's cash e-ISA, which pays 3% AER fixed until 9 November 2010. Despite the guaranteed rate, It’s instant access and you only need to save £1 to open it. After November 2010, the rate drops to 0.2% AER, so transfer out at that point.
  
  It also usefully allows transfers in from previous years' cash ISAs, except those held with First Direct. It's an online only account, and you can start saving from £1.

  Quick Stats. Rate: 3% AER, fixed until 9 November 2010. Min. Deposit: £1. Allows transfers from previous years' ISAs?: Yes Access: Online

• Abbey 3% AER. Top online account, if you've got £9,000+
  

  If you can transfer in over £9,000 of previous years' ISA cash, Abbey’s* online-only Direct ISA pays 3% AER.
  
  Yet after a year, the account will change to a variable rate, tiered depending on the amount of money you have. At this point it's vital you check your rate, then ditch and switch to a new top payer if you;re losing out.

  Quick Stats. Rate: 3% variable AER. Min. Deposit: £9,000. Access: Online

• Standard Life 2.65% AER Online, clean account
  

  For those who want a clean account but have less than £9,000 to transfer, the Cash ISA from Standard Life offers 2.65% AER from just £1. It allows transfers in of previous years money, with no notice periods or penalties when making withdrawals.

  Quick Stats. Rate: 2.65% variable AER. Min. Deposit: £1. Allows transfers from previous years' ISAs?: Yes Access: Phone/Online

• Check your local Building Society.
  
  On occasion a few small Building Societies may beat these with special deals for people in their locality or 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.
  
  

The Top Fixed Rate Accounts

If you're willing to lock your cash away there are some alternatives to monitoring interest rates, yet do remember...

Fixed rate ISAs give a guaranteed rate for a set period, but you can’t take your money out during that time.

Therefore they're only suitable for those who are happy to lock cash away for the entire term and do mean you lose the flexibility to ditch and switch to a better payer if the rate is no longer competitive compared to others or something changes in its safety stakes. (While your money is supposedly locked away for 1 to 5 years, providers are forced to permit withdrawals, usually with an interest penalty of between 60 and 180 days).

Yet currently, that's balanced out because there are some decent rates available. This is because many lenders are desperate to get hold of your cash so they can lend it out at high rates during the credit crunch. Plus with fixed rates they get surety that you won’t want it back until a defined time, thus allowing them to plan their lending strategies better.

Top One Year Fixed Rate

• Bank of Cyprus, 3.33% AER. Important! Not protected by UK safety scheme
  
  The top rate is Bank of Cyprus Cash ISA Bond, paying 3.33% AER on amounts above £1 in this telephone or post account. Transfers in from previous years’ ISAs are allowed within 6 weeks of opening the account, plus you can withdraw money, although you will be charged 180 days worth of interest.
  
  Importantly, the account is NOT protected by the UK scheme but the Cypriot scheme, which covers covers the first €100,000 (c. £90,000). See the foreign banks section of the Are Your Savings Safe? guide.
  
  
• Julian Hodge Bank BS 3.25% AER

  Alternatively, if you want full UK FSCS protection, Julian Hodge Bank's Fixed Rate Cash ISA pays 3.25% AER for twelve months, although it can only be opened and operated by post. You must deposit the full £3,600 and can transfer in previous years’ ISA money from other providers.

• Northern Rock 3.2% AER

  The next best rate's with Government-owned bank Northern Rock which pays 3.2% interest until 15 November 2010. You have to save over £500 and can transfer in previous years' ISA's. Be aware that after the fixed rate is finished it will turn into a 30 day notice ISA. You can apply for this account by post and in branches..
  
  Following Northern Rock's brush with collapse, the Government nationalised it and for now 100% guarantees all savings held in it. In the slim chance it's sold within the bond's fixed term, the safety could drop back to normal £50,000 level, though it'd be hoped the government would pick wisely about the institution any savings were sold to.

Top Deals of other lengths

If you want to lock your cash away for longer, other length deals are available, yet in the current climate there's little guidance on where rates will be in a few years time. If you choose to lock your cash away for several years now, fixed rates could improve, meaning you'l be locked into a non-top pick account.

• Two years, 3.75% AER

  Bradford & Bingley (min £1,000) pays 3.75% AER on its online two year fixed ISAs and you can transfer in previous years' ISA money.
  
  If you have less to save Cheltenham & Gloucester's two year ISA also pays 3.75% from just £100, although you can only open and access it by post or in branches.

• Three years, 4.2% AER

  If you can save £3,600 in a lump sum, Principality BS's Three Year Direct Fixed ISA pays 4.2% AER, with no withdrawals allowed for the duration. Financial strength rating's agency Moodys downgraded some institutions, including Principality, in April 2009, but as you can't save over the £50,000 safe savings limit in an ISA, it's not a huge issue here.
  
  Alternatively if you want to save from £1, Leeds BS's 3 Year Fixed Rate ISA pays 3.75% AER for amounts from £1. The account allows transfers in and up to 25% to be withdrawn penalty free. It can be opened online, but only operated by branch or post.

Fixed Rate deals can change regularly, for a full list of fixed rate ISAs use the MoneySupermarket* (select Cash ISAs and then Bonds) comparison or Moneyfacts. Though remember, they're just a simple list of top rates, so ensure you check for the possible pitfalls noted in this article.

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 occured 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.

If you have the full £34,200 (all 11 years worth) in HBSC's Cash ISA very poor 0.3% interest instant access cash ISA would earn just £310 interest over three years, compared to £3,170 with Abbey.