Lloyds 6.5% Fixed Rate Cash Isa Update

[christhpc]

I went to my local Lloyds branch today to open his and hers Fixed Rate ISAs:

http://www.lloydstsb.com/savings/fixed_rate_cash_isa.asp

Transfer in at least £9,000 and you get 6.5%. Sweet. Although unfortunately for me (and mine) we don't have £9,000 in cash ISAs yet. No problem I thought, I'll just pay in the £6,000 now and top it up next tax year. However, talking to the bank manager he reckoned that wouldn't work as the 6.5% rate (of which 1% or so is a bonus) will probably have been pulled by the 08/09 tax year. I was sure I'd read something about it being open until May 2008? Ah yes that was just to cater for the time it takes to transfer ISAs (?!) explained Mr Manager. He then mentioned some kind of 8% cash ISA that's available when you open and deposit £4,000 in a shares ISA with them. Probably deserves further investigation although I should imagine the cash ISA part won't accept transfers in.

Still, good customer service I though. I do like Lloyds.

[The Masked Tulip]

Thanks for the info. I think I will open one of these on Monday and move my ISAs from A&L and HBOS to them. I was initially put off by the 1 year fixed deal - i.e. tying your money up - but the way things are going with IRs perhaps it is best to fix now. This economy is a mess.

[Ologhai Jones]

I went to my local Lloyds branch today to open his and hers Fixed Rate ISAs:

http://www.lloydstsb.com/savings/fixed_rate_cash_isa.asp

Transfer in at least £9,000 and you get 6.5%. Sweet. Although unfortunately for me (and mine) we don't have £9,000 in cash ISAs yet. No problem I thought, I'll just pay in the £6,000 now and top it up next tax year. However, talking to the bank manager he reckoned that wouldn't work as the 6.5% rate (of which 1% or so is a bonus) will probably have been pulled by the 08/09 tax year. I was sure I'd read something about it being open until May 2008? Ah yes that was just to cater for the time it takes to transfer ISAs (?!) explained Mr Manager. He then mentioned some kind of 8% cash ISA that's available when you open and deposit £4,000 in a shares ISA with them. Probably deserves further investigation although I should imagine the cash ISA part won't accept transfers in.

Still, good customer service I though. I do like Lloyds.

On the page you linked, it does say '(only) available until 31/05/08'.

From the first day you open a FRISA, your 'bonus year' begins, so if you can't open it with £9k+, then you'll be wasting some of your potential to receive 6.5% for the full 12 months; instead you'll squander some of that 12-month period on a much less attractive IR.

It's hard to imagine that the bank manager is correct, though. If this fixed-rate ISA deal is published as being available until the end of May '08, I don't see how they could stop you putting £6k in now, then a further £3k+ in after April 6th, but, as I say, the time between opening the FRISA and it having at least £9k in it will be nibbling away at your 12 month bonus period.

One alternative you may have heard of is Barclays' Tax Haven ISA. It doesn't accept transfers in sadly, but it does offer (once again as an introductory bonus 12 months) 6.5%.

If you're able to, you could stick £3k in now, and a further £3.6k in after April 6th.

In either case, they're introductory bonus periods, so if you can be bothered, you'd be looking for something new in about twelve months' time.

[christhpc]

Thanks for that OJ. Yeah, as I didn't want my money to languish at the 5.15% rate, my first question to the guy was whether I could open the account today and fund the account £9,000 all in one go in the next tax year. No go. I was pretty sure that it was within the ISA rules - it's just when you add funds to multiple ISAs in the same year things get iffy -- but Mr Lloyds was having done of it.

Yeah, looks like it'll be the Barclay's ISA if Lloyds' offers vanishes on 6th April. Failing that... Icesave? Although with the possibility of further sterling decline it looks like a BoE rate increase may not be so unlikely in the coming months..!?

[Prof]

Got myself one of these earlier today. 6.5% fixed for 12 months seems a reasonable bet. It`s the highest rate I can find for a mini cash ISA at the moment. The only downside is if base rates go up, and ISA providers start increasing their rates, you might be able to get >6.5% within 12 months. I doubt if the BoE will increase the base rate any time soon, and if they do, I doubt that it will be by any more than 0.5%. OK, your money is "tied up" with Lloyds for 12 months, but most people will use ISAs for longer term saving anyway. I think that Barclays are offereing 6.5%, but isn`t it variable ? Although they are offering a 1% "bonus", what`s to stop them dropping their rate? Also, you can`t transfer previous ISAs into Barclays offer. Aren`t Lloyds one of the "safer" Banks too ?

In other words, I think that the LLoyds deal is very good.

[thermo]

Went into a Lloyds branch this Sat. to transfer in my ISA to them, forgot to bring in my NI number! :angry:

[Ologhai Jones]

Went into a Lloyds branch this Sat. to transfer in my ISA to them, forgot to bring in my NI number! :angry:

That happened to me, too. However, we set it up anyway (typing in a best-guess NI number -- that turned out was hopelessly wrong), and I just phoned them up with the number after I'd returned home.

It didn't seem to hold anything up.

[Kuma]

I've been looking into the Lloyds fixed rate ISA too but wasn't sure of the restrictions that can be placed on ISA transfers. I was certain I would be able to transfer the money in but I wasn't sure if they could restrict transfers out. A bit of a poke around Money Saving Expert and I found this link:

http://www.moneysavingexpert.com/savings/cash-isa-transfers

To summerise:

The truth about ISA transfers

"Providers want us to think once a cash ISA is open, it's a done deal, allowing them to drop interest rates in safety. Yet everyone has the right to transfer their existing mini-cash ISA to another provider; the trick is finding one that will let you. This step-by-step guide will show you where to put your cash for maximum gain."

However as a caveat:

Any reason not to transfer?

"You may be charged a penalty by your current provider for transferring out. This is becoming less common, but always check; a small penalty like 30 days' lost interest isn't such a big issue, but a higher fee effectively locks you in, as the gain from switching is gazumped by the transfer charge. If your ISA has a penalty for leaving, work out if you'll actually be better off by switching to the better interest rate."

Strange thing is I've just had a quick dig around the Lloyds website and I can't for the life of me find the full terms and conditions for the ISA. I'd want confirmation that there wasn't an explicit transer fee or 30 day loss of interest before I transferred my money in as I'll probably want to take it out next year!

Edited March 21, 2008 by Kuma

[thermo]

Strange thing is I've just had a quick dig around the Lloyds website and I can't for the life of me find the full terms and conditions for the ISA. I'd want confirmation that there wasn't an explicit transer fee or 30 day loss of interest before I transferred my money in as I'll probably want to take it out next year!

Good question, though I can't find any full T&C either, it sounds fom the little information they give that you get the interest rate "when you make no withdrawls" and interest "paid at account maturity". It isn't clear what happens when you make a withdrawl, so you'll probably have to speak to someone at Lloyds to find out.

Edited to add: I found this which will answer your question, It looks like you will lose 90 days interest if you move away before 12 months:

http://forums.moneysavingexpert.com/showpo...mp;postcount=40

Edited March 21, 2008 by thermo

[Kuma]

Good question, though I can't find any full T&C either, it sounds fom the little information they give that you get the interest rate "when you make no withdrawls" and interest "paid at account maturity". It isn't clear what happens when you make a withdrawl, so you'll probably have to speak to someone at Lloyds to find out.

Edited to add: I found this which will answer your question, It looks like you will lose 90 days interest if you move away before 12 months:

http://forums.moneysavingexpert.com/showpo...mp;postcount=40

Nice find, the post explicity states

There is no penalty for transferring your ISA out after a year

but I'll pop into a branch to get this 100% confirmed, I'll post up what they tell me.

The 90 day withdrawl penalty is mentioned in the small print on my leaflet. I'm about to put together another post regarding the 1.5% bonus rate you can earn and I'll put the full clause in that post.

[Kuma]

Want to earn 8% per anum on your cash ISA? Well according to a leaflet I picked up from Lloyds TSB's Moorgate branch you can (it's at this point I REALLY wish I had a scanner). And just to be really helpful there is no reference to this offer on their website

Anyway, the large text on the leaflet states:

Get up to 8% AER/tax free (including 1.5% bonus) on your Fixed Rate Cash ISA by partnering it with a Scottish Widows Investment ISA.

And underneath that comes the headline conditions

To get our best Fixed Rate Cash ISA rate of 8% AER/tax free (with bonus) fixed for one year, simply transfer and invest £9,000 or more into a new Lloyds TSB Fixed Rate Cash ISA and £9,000 or more into a Scottish Widows Investment ISA and let your money take you where you want to be. To benefit from the hightest rates you cannot make withdrawals and both accounts need to be kept open for at least 12 months.

And the bombshell (which I've only just noticed ) in the small print is

Interest is fixed for 12 Months. If you make a withdrawal from your Cash ISA you will lose 90 days' interest. If you make a withdrawal from either product you will lose the 1.5% bonus. If the balance in your Fixed Rate Cash ISA account falls beloow £3,000 you will not receive interest on your account. Interest will start to be paid again (on the whole balance) if the balance is restored above that limit. Where applicable, the 1.5% AER/tax free bonus will be calculated on the balance of your Fixed Rate Cash ISA, up to a maximum of the amount invested in your Scottish Widows ISA.

Note that offer end date is 31st May 2008 (subject to availability).

Now even with these clauses this still looks like a good deal (although I've no idea what fees Scottish Widows levy on their Investement ISA so that could put a spanner in the works). The problem that I can see (and it applies to me) is that most people aren't going to have the necessary £9,000 in the Equities side of the ISA wrapper. Not to worry, because of the impending ISA changes due in the next tax year this isn't actually a deal killer. A new clause has been added, as of the next tax year "Savers will also be able to transfer money from cash Isas to equity Isas", click here for more on changes to the ISA rules. If you do consider converting some of your cash ISA to an equity ISA then I would recommend using up this years £4,000 allowance if you haven't already, you can then do another £5000 next year and put the rest in the cash ISA.

In my opinion I wouldn't be putting money into the stock market at this precise moment unless I was going to be keeping it there for a VERY long time. Personally I'm looking into european govenment bonds at the moment as they seem to be a way to gain exposure to currency speculation but still be in a highly secure and yielding asset. Furthermore govenment bonds see capital appreciation (only if you sell it) in a falling interest rate environment, index linked govenment bonds also provide protection against inflation. The down side of bonds is that the maturity date must be at least 5 years after purchase date, for more details on current ISA limitations try this link.

Hopefully some of you found that helpful.

PS: found a reference to the offer HERE

_{PSS: As a side note does anyone else think the Scottish Widows women looks like a Beni Gesserit?}

[headmelter]

I was in A&L yesterday and they are offering 10% on a mini cash ISA if you open a current account with them and have your salary paid into it. You can't transfer previous years allowances into it.

How risky is A&L?

I had heard they had secured funding from credit suisse until 2009 but don't know how true this is, anyone any opinions.

As an aside Mrs HM banks with A&L andhas never had any problems.

[Fed Up]

I was in A&L yesterday and they are offering 10% on a mini cash ISA if you open a current account with them and have your salary paid into it. You can't transfer previous years allowances into it.

How risky is A&L?

I had heard they had secured funding from credit suisse until 2009 but don't know how true this is, anyone any opinions.

As an aside Mrs HM banks with A&L andhas never had any problems.

I have had my salary paid into A&L for the last five years. From next month onwards it goes into the Nationwide. That's how safe I think A&L is. I've only left enough money in it to keep me going 'til next pay day.

[Kuma]

Popped into a branch of Lloyds TSB today to ask a few questions, it went something like this:

CASH ISA QUESTIONS

1. Any transfer penalties at the end of the fixed term?

A. No Fee, and no interest rate deduction.

2. With my current ISA if I wait until the next financial year when interest is added and then add my full £3,600 allocation can I then transfer?

A. yes, this is fine but if the product becomes fully subscribed then it may be pulled.

3. Any forms I can take with me?

A. Yes, but out of them at the moment.

4. Can I open the ISA now and then at a later date transfer the mony in?

A. I think the answer was a no?

Regardless, the fixed interest rate period begins from the time the account is opened so you would be loosing out!!

5. How long does the transfer take?

A. Transfer is instantanious (when it actually happens), on returning the forms Lloyds will arrange the transfer.

Additionally the account will be opened at the same time the money is transferred in so that you get the full years fixed rate.

SCOTTISH WIDOWS INVESTEMENT ISA

I Spoke to a financial adviser about this product, he didn't seem 100% clued up on it so I'd suggest double checking. Additionally the meeting was rather rushed as he was trying to fit me in before his next appointment.

1. Tell me about your ISA product

A.

1. Investment horizon is about 5 years
   
2. Funds available reflect your attitude to risk
   
3. 0% balance charge until 31 May 2008, normally 5% (he surely must have meant .5%!)
   
4. Managment fees are absorbed into fund return (not a separate transparent charge)
   

2. Your website quotes approximately 12 Funds, can I pick and choose my investements or am I limited to just those 12?

A. Only those 12, your cannot pick indvidual shares and bonds.

Each fund (really a fund portfolio) invests your money into a range of funds in accordance with the portfolios goals (risk profile and asset class)

3. To qualify for the bonus rate does it have to be via a transfer in or can I open an ISA now using this years 4k allowance and then invest another 5k next financial year.

A. Yes, that is fine.

4. What if I have an equities ISA with another provider and want to transfer it in?

A. You would have to liquidate the ISA and transfer over the balance and then re-invest it in one of our fund portfolio's.

I'm going to schedule a proper meeting I can go through the fund options in detail, I suspect there IS the option of investing in the specific underlying funds instead of the fund portfolio. I'll have a further dig around their site regarding this.

Questions I should have asked

1. If I fill in the cash ISA application form today, when is the account opening dated from, surely the time of the transfer?

(Lady on the enquiries desk said the ISA application department was swamped at present, so might take a few weeks)

2. If I open up an investement ISA today will I be able to use this years Equity ISA allowance, even if the application takes three weeks to process?

_{Questions I really really should have asked as the FA was starting to piss me off}

_{1. I see you have table showing yearly returns by asset class in your brocure, why does it only go back to 1992?}

_{2. In said table I see that equities took a beating in 2000 (-5.9%), 2001 (-13.3%), and 2002 (-22.7%) considering that was a bear market and we appear to have just entered into another one now, do you consider equities a good investment at this time.}

_{3. Further more, considering the affor mentioned bear market and pesistence of this 'credit crunch' why do you suggest I should like to convert over half my cash ISA into an equities ISA?}

_{4. In all likelyhood we are entering a recession, do you really think that corporate bonds are a wise investement, especially as the bond issuers appear to be financials (e.g. top holding is in A&L)?}

_{5. why do you keep pointing out I'm young?}

_etc...

[The Masked Tulip]

I am treating it as a fixed term tax free bond for 12 months. Put the cash in, forget about it till April 2009. End of story. They offered me the Scottish Widows shares bit but I declined and just wanted the cash component.

[christhpc]

Thanks for the comprehensive replies KUMA. Echoes my experience talking about the 6.5% cash ISA and answered pretty much every question I had remaining about the 8% ISA + associated fund thingy!

And 5% charges aren't so uncommon on funds. That's why fund managers all drive around in Mercs while their customers' investments resemble smouldering craters.

[delboypass]

I really dont understand how some people here are only opening cash isas for this year now (Mar)...and then again in April...

Surely you must have opened your cash ISA back in last April or where am i going wrong...??

[juvenal]

I really dont understand how some people here are only opening cash isas for this year now (Mar)...and then again in April...

Surely you must have opened your cash ISA back in last April or where am i going wrong...??

It's late in the day to be investing in the 6.4.2007 - 5.4.2008 ISA season, but it's still worthwhile.

They are doing it now to make sure they tuck away however much they can afford during this financial year, which ends April the 5th 2008. Maximum allowed in the year just ending being £3000 in a cash ISA. That ensures that the money benefits from the ISA's tax free status for as long as it's in the ISA. Ordinary cash ISA's are open ended. Draw the money whenever you wish.

They can open a new ISA after April 6th 2008 using the increased allowance of maximum £3600 for the new financial year.

The principal tip with ISA's is to use your allowance every year, however late you put it in!

Does that clear up your query?

[juvenal]

delboypass

My phrase 'open-ended' applies only to the ordinary cash ISA. Lloyd's one year fixed rate ISA obviously fixes the rate for only one year after you've taken it out. Thereafter you should check who is offering the best deal currently and transfer, if needed.

[Ologhai Jones]

I really dont understand how some people here are only opening cash isas for this year now (Mar)...and then again in April...

Surely you must have opened your cash ISA back in last April or where am i going wrong...??

I agree with your sentiment -- All else being equal, opening (and depositing up to the limit in) a cash ISA as early as you're able (i.e. April 6th) would generally be the right thing to do.

It's not always true, though, that all else is equal!

[Kuma]

I really dont understand how some people here are only opening cash isas for this year now (Mar)...and then again in April...

Surely you must have opened your cash ISA back in last April or where am i going wrong...??

I'd assume those who didn't open a cash ISA at the start of the current finacial year fall into two categories

1. Didn't have the money

2. Didn't know about ISA's

(actually a 3rd; those who don't care about money)

The first time I took out a cash ISA it was at the end of the financial year, that was the year I started work so I didn't have either the savings or concept of what an ISA was. Now I make sure that I always add to my cash ISA at the start of the financial year.

Personally I've never added to an equity ISA, it's only recently that I've acheived what I consider an 'acceptable' understanding of equities, the market dynamic, and the various tax benifits the ISA wrapper offers. Furthermore I would judge that any equity investment that a person makes before they acheive this basic level of understanding is purely a speculative move and is likely based on the advise of a salesman (I think they call them financial advisors now days?).

For what it's worth I consider the equities market far to volatile at present to consider investing in on anything but a very long time frame. The only reason I am considering it for this tax year is that Scottish Widows are in effect guaranteeing a 1.5% tax free return on any equity ISA investment. As long as I can find a fund that pays ~ 3.5% net over the next year then with the 1.5% bonus rate it will work out 5% net, that is as good as any savings account out there at present.

[The Masked Tulip]

I normally open mine at the end of each financial year - usually in March so there is little point opening another one again in April. Yes, I lose the 12 months interest but I like to keep my options open if I think the markets are low and can then opt instead for a shares ISA rather than a cash one.

I opened this year's one back in Feb because I concluded that the stockmarket was too risky - wish I had sold my one share ISA last Dec now - and will this year open another cash ISA in April because I know I have no intention of going into shares in the next 12 months.

[Spoony]

I've transferred a lot of money into this fixed rate ISA. Although the branches tell you theres no loss of interest, the reality is different. I had to get them to backdate 12 days interest to compensate for the delay between my old ISA closing and the money being credited to LLoyds. There a large thread about it from disgruntled owners of this Lloyds fixed rate ISA on moneysavingexpert.com

Their customer service is appalling and their staff clearly have no clue about ISAs.

Edited March 27, 2008 by Spoony

[garybug]

OK, am I missing something obvious here? If the limit is 3k / person / annum on a cash ISA, how can I be allowed to invest 9k & over in the Lloyds 6.5%, given that it's listed on their site as a Fixed Rate Cash ISA?

[Ologhai Jones]

OK, am I missing something obvious here? If the limit is 3k / person / annum on a cash ISA, how can I be allowed to invest 9k & over in the Lloyds 6.5%, given that it's listed on their site as a Fixed Rate Cash ISA?

You could transfer ISA funds from previous years (potentially in addition to using this year's £3k and/or next year's £3.6k).