Beware restrictive ISA transfers

With the ISA season now kicking off, Abbey warns people to watch out for restrictive transfer conditions when choosing a new ISA provider.

Abbey’s research shows that one in seven ISA accounts do not allow transfers in. These include two out of five “leading “ accounts, with high market rates.

Furthermore, one in 11 accounts have strings attached to transferring money out, raising the possibility of people being hit by further charges or restrictive conditions. Catches include: -

Up to 30 days notice required
An ”administration fee” for the amount transferred
Subject to a £25 charge

These restrictive conditions could impact people’s ability to switch to make the most of their tax free allowance. All Abbey’s ISAs allow transfers in and transfers out of existing ISA balances. The average transfer balance of ISAs is £12,000. With Cash ISA limits extended to £3,600 next tax year, the importance of transfers is likely to become even more significant.

Reza Attar-Zadeh, Director of Savings and Investments at Abbey, said: “With the average transfer balance of ISAs at £12,000, savers need to look carefully at the transfer conditions on cash mini ISAs. By not allowing transfers in customers cannot benefit from a leading rate and are restricted to the tax-free benefits to just £3,000 this year, and £3,600 next.

“More strange is the myriad conditions on transferring out. Savers could end up paying to transfer out their money, or are subject to time locks. Cash ISA investors have many options without restrictive conditions. Abbey’s Direct ISA (Issue 2), for example, currently offers an attractive 6.25 AER per cent.

“We urge savers to fully use their ISA allowance to ensure they minimise their tax bill.”

Customers can apply for an Abbey ISA account by visiting abbey.com.