Beware transfer restrictions on this year’s cash ISA best buys

With the tax year deadline approaching, Abbey today warns that many of the “top buy” accounts operate restrictive transfer conditions.

Previous Abbey research has shown that one in six ISA accounts do not allow transfers in, and one in 12 does not allow transfers out. Currently the three leading “headline” rates all have restrictive transfer conditions.

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.

Best buy tables operate on different criteria…

Consumers need to be aware that best buy tables operate on different criteria and may not factor in transfer issues. For example, Moneyfacts does not include Abbey’s Direct ISAs in its best buy tables because of the size of the bonus on its account (which is up to 1.5% for 13 months) while it includes accounts with restrictive transfer criteria in its best buys.

Abbey argues that offering instant access, non-restricted transfers on ISA accounts is a more important attribute since it allows people to switch money freely in and out of accounts to take advantage of the best rates.

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. Moreover, restrictive transfer out conditions may limit savers future ability to switch to the best deals.”

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