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ISA Interest rates v standard rates
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WendellG
Posts: 38 Forumite
For many years the interest rates from ISA have been higher than savings rates as well as being tax free. However this year the rates are so low I am wondering whether I am better off not taking money out of other savings accounts and putting it into an ISA.
As I understand it, an ISA rate of 2.2% equates to an taxable savings rate of 2.65%, so if I am getting that or higher then an ISA isn't worth it.
I ask as I getting 2.8% in a Natwest esaver, so I'd be losing out moving this years allowance. I guess the unknown is how long Natwest will stick with that higher rate. Are there any other reasons why I should sacrifice some interest to add to my ISA?
As I understand it, an ISA rate of 2.2% equates to an taxable savings rate of 2.65%, so if I am getting that or higher then an ISA isn't worth it.
I ask as I getting 2.8% in a Natwest esaver, so I'd be losing out moving this years allowance. I guess the unknown is how long Natwest will stick with that higher rate. Are there any other reasons why I should sacrifice some interest to add to my ISA?
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Comments
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For many years the interest rates from ISA have been higher than savings rates as well as being tax free. However this year the rates are so low I am wondering whether I am better off not taking money out of other savings accounts and putting it into an ISA.
As I understand it, an ISA rate of 2.2% equates to an taxable savings rate of 2.65%, so if I am getting that or higher then an ISA isn't worth it.
I ask as I getting 2.8% in a Natwest esaver, so I'd be losing out moving this years allowance. I guess the unknown is how long Natwest will stick with that higher rate. Are there any other reasons why I should sacrifice some interest to add to my ISA?
The big advantage of ISAs over standard savings accounts, even when interest rates are low, is that they are tax free for life (or at least until the Government changes the rules
)
So, if you use ISAs over many years you can build up a very substantial pot of savings, earning interest, tax free :T. The ISA allowance is also 'use it or lose it' - you can't carry it forward.
If you're not in a position to save year on year, then you might as well go for the highest rate, which at the moment will be found in a variety of current accounts, and drip feed from there into a higher interest rate regular saver.0 -
Thanks Badger, I hadn't thought about the longer term view.
I think I'll rate tart the Natwest account as long as it lasts and transfer into an ISA when they cut the rate or before the end of the tax year.0
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