By Dan Hyde
Updated:
Your Isa questions: Answered
If my current provider Isa pays out interest on its anniversary (5 April) and I want to get a better interest rate with a new provider in time for the new financial year, how can I protect the interest payment and save myself any penalties? Via email
Dan Hyde, savings correspondent at This is Money, says: Today's best rates - be that a fixed deal or an instant access account - usually have an expiry date on them.
With fixed rates, you need to wait until the end of the term before moving your cash. It's absolutely essential. The penalties for early access can be severe, sometimes as much as 365 days worth of interest. Savers can get back less than they put away if they're not careful.
With easy access Isas, though, there is no problem. The whole point of variable rate accounts is to give you freedom to move the money whenever you like, penalty-free.
In 99 out of 100 cases, that will not affect the rate you receive. When you transfer your money to a new account a bank or building society will add up the interest you've accrued thus far and pay out.
It does not matter when the interest payment date is. Some banks say 'interest paid on the account anniversary'. If you leave early, you'll get everything you've earned thus far, regardless.
However, a tiny minority of savings accounts have in the past specified that savers need to keep their money invested for a whole year to get an extra bonus rate.
These bonuses are artificial teasers ratcheted on to an underlying rate so the account makes the headline. Typically they last for 12 months. It is worth checking with your provider whether you lose your entitlement to the bonus if you close before the bonus expires.
A quick note: never withdraw Isa cash manually and then reinvest it. It loses its tax-free status and will cost you part of your current-year Isa savings allowance as a result. If it's a large sum, you will not be able to put it all back into an Isa.
In short, then, the answer to this question comes down to whether you've got a fixed or variable account. If fixed, wait until your term is up. If variable, you should be fine to transfer whenever you like. Just check to make sure.
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