The many users of our services like to keep us on our toes by asking interesting, and sometimes challenging, questions about savings. So we've selected the best five savings questions from our electronic postbag to share with our readers:
- Does having an ISA prevent me from saving with tax free NS&I?
- Can I open more than one ISA in the same year?
- Does full power of attorney convey the right to use that person's ISA allowance?
- What happens to the interest rate on a variable rate account when an issue is withdrawn?
- Why do the rates on some savings accounts plummet after a short period?
If you have a savings question for us, or you don't like the way your savings provider is treating you, please don't hesitate to contact us on [email protected] or 0800 321 3581.
Q1. Does having an ISA prevent me from saving with tax free NS&I Certificates?
A1. The short answer is no.
National Savings & Investments (NS&I) offers tax free savings certificates from time to time.
There are two types, Fixed Interest and Index Linked, neither of which are currently available. However, when they are available you would be able to invest into a cash ISA, as well as investing into the NS&I Certificates.
Index Linked Savings Certificates, can be very useful, especially for tax payers, as they will pay a rate equivalent to the Retail Prices Index, plus a little extra, normally over either two, three or five years.
If and when they become available again, the precise terms will be specified then, so these points are necessarily based on the position in the past, but will give you an idea of what to expect. It will be important to check the terms at the time of course, and we’ll be happy to help then if you wish.)
As the returns from these are tax free, you can be sure that your money will always be protected from inflation.
Fixed Interest Savings Certificates are also available sometimes, but not always. They too are tax-free and, as their title suggests, they will pay a fixed interest over a fixed term of normally two or five years. (Again we must wait and see the precise terms when the Certificates are re-introduced.)
Based on past experience, you generally need to leave your money invested for the whole of the Certificate’s term to get the benefit of the full interest rate, so you will need to be sure that the term meets your needs. NS&I is government backed, so capital invested in these Certificates is very secure.
NS&I also offers a cash ISA but if you were to invest into this, you could not take out another cash ISA in the same tax year, unless you were transferring the proceeds from an old ISA into a new one.
Q2. Can I open more than one ISA in the same year?
I opened a Cash ISA account with Nat West this year but have never put any money in it. Is it legal for me to open a Cash ISA with Sainsbury’s and put my savings in that instead? Can I wait to close my NatWest ISA until after I have opened the Sainsbury’s ISA?
A2. In principle no, but..
The current rules state that you can only subscribe to one Cash ISA provider in any one tax year, although you can transfer that ISA in full from one provider to another.
However, according to TISA (Tax Incentivised Savings Association), if you have never contributed any money at all (not even 1p) into the ISA that you have opened with Nat West then you may not have actually subscribed and therefore you could open the Sainsbury’s ISA without flouting the rules. Ultimately you should check with Nat West to clarify whether they believe you have subscribed as, if you do subscribe to two cash ISAs in the same tax year, the payment into the second ISA is invalid.
If you have made even the smallest contribution, or if Nat West insist that you have subscribed, what you could do is to put the amount you wish to save this tax year up to the maximum allowance (currently £5,640) into your current NatWest Cash ISA account and then approach Sainsbury’s bank who will arrange the transfer from your NatWest ISA – hopefully before Sainsbury’s closes the ISA for new business.
For more information on the rules you might like to look at the HMRC website where there is plenty of information about the rules governing ISAs.
Q3. Does full power of attorney convey the right to use that person's ISA allowance?
My husband has developed Alzheimer's Disease and is now a permanent resident in a private care home. I have full power of attorney over all his personal and financial affairs. He has a number of ISAs in his portfolio (as do I in mine). I have already used my 2012-13 allowance. As his Attorney may I legally invest further funds in ISAs registered in my husband's name?
A3. The short answer is yes
The good news is that even though he needs you to be his Power of Attorney, he is still entitled to use his ISA allowance, so you are able to open ISAs in his name.
We would suggest contacting any provider that you are considering and checking if they have specific application requirements for Power of Attorney cases.
Q4. What happens to the interest rate on a variable rate account when an issue is withdrawn?
A4. You will remain on the rate for that issue
The rate will only change if the provider changes the rate for that issue, or if the bonus ends. Sign up for our free Rate Tracker service and we will remind you when the bonus is due to end, or if the rates change in the meantime, and inform you of the best rates available at that time so that you can move your money from what will likely become a very uncompetitive account.
Q5. Why do the rates on some savings accounts plummet after a short period?
We have just had a letter from Nationwide informing us our Isa rate is dropping to 1.75 at the end of the month...bl**dy annoyed at this,it`s just not worth the bother.
A5. Mostly because bonuses end
We understand your frustration but we're afraid that bonuses are an unpleasant fact of life in the current savings market and one of the reasons why we set up our unique and free Rate Tracker service. If you register your savings accounts with our service, we will then notify you when the bonus is due to end on your accounts so that you have time to move to a better rate before the rate plummets. You can use our best buy tables to help you find the best account to transfer to.
We also offer a free Rate Alert service which provides a regular weekly update of what’s happening in the savings market, including new best buys and details of best buys about to be withdrawn.
Remember that if you have a savings question for us, or you don't like the way your savings provider is treating you, please don't hesitate to contact us on [email protected] or 0800 321 3581.
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