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Flexible Isas shunned by banks

Only a handful of Isa providers embrace new rules

Flexible Isas were introduced in April 2016, but it’s not compulsory for banks to offer them

The majority of banks and building societies have shunned new rules introduced to make Isas more flexible.

Which? Money has found that only a handful of providers are allowing savers flexible access to their Isa, while many haven’t adopted rules on inheriting Isas which allow customers to inherit their partner’s Isa savings tax-free.

Those hoping to take advantage of the new flexibility may therefore need to transfer their savings to a new provider.  

The Which? Money Compare savings and Isa tables let you search hundreds of savings accounts and Isas from providers large and small to find a great savings rate based on quality of service as well as cost and benefits.   

Which? Money Compare table – savings accounts and Isas – hundreds of deals compared

Flexible Isas shunned by providers

Under new rules introduced on 6 April 2016, savers can add money to their account, take it out again and replace it later in the year without losing any of their annual allowance.

However, most Isa providers are keeping the old rules in place, meaning that if, for example, you deposit the maximum £15,240 and later make a withdrawal, you won’t necessarily be able to make any further deposits.

Some 40 of the 57 cash Isa providers we looked at don’t offer Isa flexibility at all, including big names such as HSBC, the Post Office, Royal Bank of Scotland (RBS)/NatWest, Santander and The Co-operative Bank.

Very few building societies have embraced the new rules, with the exceptions of Coventry, Nationwide, Newcastle, Principality and Skipton. Yorkshire Building Society Group told us it plans to allow flexible withdrawals on some accounts during the second half of 2016.

Those hoping for flexible stocks and shares Isas will be equally disappointed, as they aren’t available at 11 of the 12 providers we asked: AJ Bell, Danske Bank, Fidelity, Hargreaves Lansdown, HSBC, Lloyds Banking Group, M&S Bank, Nutmeg, RBS, Tilney Bestinvest or Virgin Money. Only The Share Centre told us that its entire Isa range is flexible.

Inheriting an Isa

Our research also shows that many Isa providers are yet to adopt new rules on inheriting Isas, which were announced with some fanfare in April 2015. 

Under the old system, Isa savings automatically lost their tax-free status when the account holder died. But surviving partners can now inherit an additional Isa allowance, known as an additional permitted subscription (APS), equivalent to the deceased’s Isa balance.

However, as with Isa flexibility, it’s not compulsory for providers to comply with the new rules. AA Savings, Al Rayan Bank, the Post Office and Shawbrook Bank are among the providers that don’t currently accept an APS, along with most building societies (Buckinghamshire, Cambridge, Furness, Hanley, Harpenden, Hinckley & Rugby, Leeds, Manchester, Mansfield, Marsden, Melton Mowbray and Saffron).

Aldermore told us that it reviews this on a case-by-case basis. And of the Isa providers that will accept an APS, some will only do so if the deceased Isa holder was a customer (Co-op, Smile and Britannia; Tesco Bank; Coventry and Ipswich building societies). 

Others ask beneficiaries to open an inheritance Isa solely for this purpose. 

How flexible is your bank?

The table below features 18 major Isa providers and outlines how flexible their cash Isa products are. If you’re in any doubt about the flexibility of your cash Isa, ask your provider whether or not it applies these new rules. 

How flexible is your bank?
  Flexible Isas Inheriting Isas
Barclays a
HSBC (also M&S Bank and First Direct)
Lloyds(also Halifax and Bank of Scotland a
Metro Bank a
Nationwide BS b
Post Office
RBS (also Natwest and Ulster Bank)
Santander b
The Co-Operative Bank (also Britannia and Smile) b
Table notes: aSelected Isas only bThe beneficiary must open a dedicated inheritance Isa account.

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