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New ISA limits - Ask our expert

On the subject of new ISA limits, our expert says...

Hi Dot,

Thanks for getting in touch. You’re right, ISA allowances do increase on 6 October this year for people over 50. The limit will increase for everyone else next April.

The total annual limit for investment in ISAs will be increased from £7,200 to £10,200 and the amount which can be saved in a cash ISA will be increased from £3,600 to £5,100.

So, if you are over 50 and have already invested the full £3,600 in your cash ISA, you can invest up to another £1,500 in cash this year. However, whether you will be able to add this money to your existing cash ISA depends who your ISA provider is.

It is not compulsory for banks and building societies to accept ISA top-ups from October and there have been concerns that some providers, especially the smaller ones, may not have the necessary procedures in place in time to accept top-ups.

Some providers, including Principality building society, Leeds building society and Yorkshire building society, have announced that they are ready, but many others have not confirmed their positions yet.

If you want to top-up your ISA in October, you should contact your provider directly to find out what its policy is on new ISA allowances.

If your provider is not accepting top-ups, you might want to think about switching to a provider that does. As you can only invest in one cash ISA each year, you will need to transfer all the money you have invested this tax year (since 6 April 2009) to the new ISA before you can invest the additional allowance.

There have been a number of new cash ISA products appear on the market recently in anticipation of the new allowances, so you should shop around and compare ISAs to ensure you get the best deal. By switching, you may even be able to get a better interest rate than you are getting on your current ISA.

However, before switching you need to look at the terms and conditions of your current ISA to ensure you won’t be penalised for doing so.

For example, if you have a fixed-rate ISA, your provider may not be accepting top-ups but you may also be penalised with reduced interest if you transfer your cash. In this case, you should discuss your options with your provider and carefully weigh up the benefits of switching against potential penalties.

Ask Chris a question

If you have an money query please email OurExpert@CreditChoices.co.uk

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