Savers eager to get the best interest rate are being urged to check the small print before emptying their Isas — or risk ending up with less than they started with.
Banks and building societies, unless told otherwise, will often move your money into low-interest accounts as soon as your Isa matures — so savers are usually keen to transfer their cash to a better rate as soon as possible.
But Money Mail has found banks and building societies will charge as much as 365 days' interest if a customer is too quick to move their money before the rates plummet.
Banks and building societies, unless told otherwise, will often move your money into low-interest accounts as soon as your Isa matures — but don't move your pot too soon
Savers with a £25,000 investment could lose up to £530 if they touch it even one day too early, while someone with £100,000 saved could lose up to £2,120.
Individual Savings Accounts (Isas) allow customers to save tax-free, putting away a maximum of £20,000 each financial year.
Millions of savers opt for fixed-term Isas because they usually offer better rates than easy-access deals. But these rates will usually drop dramatically when the term ends.
So if you are too slow to move the money, you could lose out on precious interest, and if you are too quick, you could face a hefty fine.
Money Mail reader Melville McGregor, 73, had been earning 2 per cent on the £24,294 he had put in a three-year fixed-term Isa with Nationwide, but the rate was set to plunge to 0.5 per cent when it matured.
When he found a new deal with Charter Savings Bank paying 1.52 per cent, he assumed it would take at least a week for the money to be moved.
But the transfer took only four days and he was hit with a £374 penalty — the equivalent of 270 days' interest — when the money was pulled from his Isa before it had fully matured.
The retired architect only heard about the charge when a letter from Charter Savings Bank told him there was much less in his new account than he expected.
Melville, who lives in Epsom, Surrey, with wife Margaret, 73, says: 'It's a completely disproportionate fine. For just a few days it seems ridiculous.'
Pitfall: John Thornton and wife Pamela faced a £1,259 penalty after closing their Isa early
Meanwhile, John Thornton, 74, was charged £1,259 when he closed his Isa 16 days too early in 2017.
Nationwide wrote to John, who lives in Cheltenham, Gloucs, with wife Pamela, to let him know his Isa would be maturing — but it did not mention the early-access charge. It later refunded him as a gesture of goodwill.
John, a retired engineer, says: 'It was a rude awakening for me. Pensioners like us need to be more wary and double-check these things — but banks should be obliged to make sure customers don't make these mistakes.'
As an account's fixed term draws to a close, savers should receive paperwork from their Isa provider with the maturity date. They should then start to shop around for the best rates on offer.
Rates can change within weeks, though, so it is worth contacting an Isa provider to ask if they can hold the rate for you.
We need to be more wary and double-check these things — but banks should be obliged to make sure customers don't make mistakes
John Thornton
Online banking also now means transfers take just a matter of hours — or even seconds.
Tom Adams, head of research at advice service Savings Champion, recommends savers arrange to move their money on the day after the maturing date 'to be on the safe side'.
He adds: 'Where possible, it could be a good idea to contact the new and old provider so you are sure you will not subject yourself to charges.'
You should then note the date your new Isa will mature
