I currently have an isa that I have had for many years, the freedom of its movement has been a blessing. However I recently received notice that not only will the account no longer permit standing orders in, it will also be dropped to a whopping interest rate of 0.25%.

I have very little in the account, however I plan to begin saving, but 0.25% does not seem worth it. Price comparison sites have highlighted similar isa's available for at around 2% interest.

My question is; is there any reason I should be wary of changing isa account? What features are important to note?

  • Check with your provider for any restrictions they may have on transferring ISAs. They may also make you pay a charge. – DumbCoder Jun 16 '15 at 10:22
  • ISAs aren't allowed to charge you for access. They may however penalise you by forgoing some of the interest earned - eg. 120 days of interest is removed. But this is only some... Check with your provider. – Chris Jun 17 '15 at 20:00

The first thing to note is that if you want to make the change without consuming any of this tax year's ISA allowance you must select a new account which allows transfer in and make sure you follow the new provider's transfer process. All providers must allow transfer out but processing transfers in is optional so not all providers do it for all accounts.

Second is that you should determine whether your existing provider levies any charges or place any restrictions on transferring out. My experience has been that cash ISA providers do not do this (I assume from your mention of interest rates that we're talking about cash ISAs) but it doesn't hurt to check.

When choosing the new account it's up to you to decide what features are important. If a regular payment facility via standing order or otherwise matters to you then check for that. Likewise if you want internet access to your account (there are still phone/post/branch only accounts out there). If this is money you expect not to need you may be able to get a better rate by going for a fixed rate over a couple of years.

One thing to watch out for is bonuses. It's common for a rate to have a bonus applied for a year, so in 12 months you might find yourself in the same position when your account suddenly becomes uncompetitive. This isn't a huge problem if you're prepared to transfer again, but if you want an account you can forget about then you might be better going for a slightly lower rate without any bonuses.

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