Frank O'Donnell

The Cash ISA is one of the few legal and most popular thing you can do with your money to avoid tax.

Some of these banks and building societies will hook you in with mind-blowing rates of interest only to reduce them later when you’re not looking!

They gamble on you not being bothered to check your interest rate and not realising that you can transfer your ISA funds to another account in order to earn the most out of your money that they can.

For those that actually check your interest rate and know you can transfer your ISA, it can be difficult to find out what your account is actually paying (particularly if your account is no longer available to new customers). Worse still, if you want to transfer your ISA, banks and building societies can notoriously drag their feet.

Happily all that is about to change!

The Office of Fair Trading (OFT) has recently taken a look at this behaviour and has introduced some new guidelines. The two biggest points are:

From 31 December 2010

• Cash ISA transfers must happen within 15 days. You continue earning interest during the transfer period and if they take longer your old bank or building society must pay you interest at the rate of your new ISA. At present, transfers can take the best part of a month and in some instances, several months, just to move money from one account to another.

From 2012

• Interest rates will have to be clearly published on all ISA statements. Yes, amazingly at present only 15% of ISA providers do this. It’s almost like they don’t want you to know isn’t it?

How to go about transferring your Cash ISA

The important thing to remember if you want to transfer your ISA is do not to close your account and withdraw the money. Once you find a new provider, you will need to fill out an ISA transfer form from your exiting provider.

The reason it needs to happen this way is to shield your tax-free ISA allowances. The minute you withdraw your money it will lose its tax-free status – you will then only be allowed to pay in up to £5,100 per tax year into an ISA, rather than your full balance, which can be a great deal higher.