09 Mar 2015

A question about : Am I right with this ISA strategy?

Please could someone confirm if my understanding of ISAs is correct... ?

I opened an ISA a few years ago with Bank A, briefly deposit some money in it, but took it out. There is currently Ј0.42 in there, the interest rate has fallen to 1.25%.

I am now thinking of getting serious with an ISA strategy for the first time, but want better returns. I am looking at opening a fixed-term ISA from Moneysavingexpert's list (eg. BankB).

I suspect what I should be doing is depositing the maximum with Bank A during this financial year 2014/15 about to end, then opening an ISA with Bank B for the 2015/16 year.
Then, during 2015/16, I order Bank A to move my first tranche of savings to Bank B so that the full amount is in there alone, where it can all benefit from the better rate. That way, this is not two deposits but one deposit and a transfer, right?

Is this right?
If so, what are the dates I should be looking to do this, ie. should I apply for Bank B ISA within this financial year or wait to next?

Thanks very much.

Best answers:

  • Why wouldn't you open an ISA with Bank B this year?
    You need to be careful if you're going to go with this strategy because some ISAs don't allow transfers in/out.
  • You can do what you describe though the question is why you would put money into a cash ISA at all when you can get better interest elsewhere. If you are looking at the longer term, an S&S ISA could make more sense than keeping money in cash.
  • When it comes to investing, it is not so much a case of which company administers your investments (e.g. AXA Self Investor) but much more a case of what you do invest in (e.g. funds, shares, trusts etc etc). Basically, all companies that manage investments allow you to invest in whatever you like, and there are thousands of investment options. You have to pick the investment, they just administer it for you.
    To figure out how to choose an investment, you need to read up about investments. One easy place to start with is http://monevator.com/category/invest...ing-investing/, but you can also search the forum for 'recommended reading' and you should find a lot more/similar suggestions for reading up about investments.
  • You do not say whether you will need this money you intend to invest/save in either this tax year or next year. If you need access to some or all of it then a stocks and shares isa is not the best place for it. Also what amount are you talking about. Now the limit for each tax year is Ј15000 ( I think it increases for 2015/2016) your question about transfers to cash isas may be moot.
    Also as Archi Bald says you may get even better interest with a high interest current account but until you give us more details like amounts and timescale and what you are investing for it is difficult to give you advice.
    One point is that you will be no means guaranteed a high reward if you invest in a high risk stocks and shares isa in fact you stand a risk of losing a considerable amount of money so I would suggest some reading and research before you decide to take this route