A: If, like a lot of savers, you have money in a Cash ISA whose rate has plummeted in recent weeks, it makes sound financial sense to transfer it to another ISA with a better rate, especially as, from 6 April 2013, you can save a further £5,760 tax free on top of what you have already put away this last financial year.
Although the current rates for an instant access Cash ISA are shockingly low – the best one that accepts transfers from old ISAs is the Direct ISA Saver (Issue 1) from Santander, which offers 2.5% for 12 months.
You will need a minimum of £2,500 to open this particular ISA, but if you’re transferring funds, this hopefully should be ok. Just remember to put the date of opening the ISA in your diary and make a note to switch again in a year when the rate drops to 0.5%.
The most important thing to remember, though, when moving money from one ISA to another is to NEVER withdraw the money yourself and use it to open the new ISA. If you do, you will lose all the tax-free allowances on the money you’re transferring.
When you have chosen the new ISA you want to transfer the money to, simply complete an application form and a transfer authority form and your new provider will then request the funds from your old provider, protecting all interest earned and tax-free allowances on that interest.
In the past this process has sometimes taken a long time to complete, so at the end of 2010 these rules were changed and the maximum time taken to transfer between providers should now be no more than 15 working days.
If, for any reason, your transfer doesn’t take place within this time, do complain, as you should be entitled to earn interest from your new provider from day 16 of the transfer process, regardless of whether the transfer has actually completed.
Andrea Ventress, Money Expert
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