Can I transfer my money from my current Isa to one with a better rate?

Q I have a mini-cash Isa with HSBC which I invested in the financial year 2002/3. However, HSBC has recently dropped its rates and I have seen a more attractive rate somewhere else. Am I able to transfer all the funds in the HSBC account (capital and interest) to the account with the higher rate, or am I stuck with a less competitive return?

RA

A There is nothing to stop you transferring the money to another Isa, but of course it would no longer be a 2002/2003 investment. It would have to be counted against your Isa allowance for the current tax year (2003/2004) and would be confined to a maximum of ?3,000. You cannot transfer the whole fund of capital and interest.

However, with a mini-cash Isa, in addition to the cash element of ?3,000 you are allowed to invest a further ?3,000 each year in stocks and shares, including bonds, and a further ?l,000 on an insurance policy. The three elements can be from different providers.

Also, as far as I am aware, the HSBC mini-cash Isa is subject to CAT (charges, access and terms) standards, which means that there is no penalty for transfers out - although you should check this first. Inevitably there is a loss of interest period when transferring from one Isa to another and the terms of the new Isa may be different. Therefore you will also have to consider whether making a switch actually provides a better return overall.