Stocks and shares ISAs, where are they?

The main MSE site is about savings, not investing. S&S ISAs are about investing.

If you are thinking of "parking" some cash in an S&S ISA so you can put it into a cash ISA on July, think again. It is not a good idea since you are likely to get hit with charges.

If you are indeed desperate to have £11K in a cash ISA in July, just open an instant access, or a regular saver cash ISA. If you want a fixed cash ISA, ask your provider what they offer in terms of adding money in July.

You could also just keep your cash in one or more good current accounts until July (or even until next April) because you can almost certainly get more interest in current accounts than you get in a cash ISA.

If you want to know about S&S ISAs, start with familiarising yourself with investments. S&S ISAs are simply investments with a tax wrapper. Lots of reading suggestions here: https://forums.moneysavingexpert.com/discussion/4752194

you can, after July 1.

Doing anything "unnatural" before then is just not worth it IMO, as I have already commented.

There's a larger debate on this over on the ISA board.

ukflippy wrote: »

If you're just talking about parking cash, I guess it doesn't really matter which one you use - I use hl.co.uk.

Yes it does matter because all the providers have different sort of charges for S&S ISAs.

For instance, the HL charges in July will be £25 to withdraw cash, and £25 to close the ISA. Not sure whether their 0.45% platform charge will apply to cash.

Personally, I think the idea of parking cash in an S&S ISA from April to July, for the sole purpose to transfer the cash to a cash ISA in July, is bonkers. It is particularly bonkers for people who don't even understand what charges they will incur.

Archi_Bald wrote: »

Personally, I think the idea of parking cash in an S&S ISA from April to July, for the sole purpose to transfer the cash to a cash ISA in July, is bonkers. It is particularly bonkers for people who don't even understand what charges they will incur.

I agree that if you don't want an S&S ISA or investment risk and don't understand them or want to try to fathom the charging structure across multiple providers, keep well clear! However some people on this site are the type who want to maximise interest earned or costs saved regardless of the hassle involved, either for an economic gain or a sense of satisfaction from "beating the system".

So - if you are the type of person who does not want any investment risk so have not used your S&S allowance in 2013/14, but would like to wrap as much cash in ISAs as possible every year and will be able to max your annual 15k limit for the forseeable future: it is perfectly feasible to park 5.7k cash in an S&S wrapper in the next couple of weeks, forgo the nominal interest it would have earned in your bank account for the next four months, pay the operating costs of the S&S wrapper, and transfer it to cash ISA in July.

The operating costs and the opportunity cost of the cash not doing anything for you while dormant, might be kept under £100 or so if you're only doing it for 4-6 months; there is at least one provider that will offer you £100 cashback for signing up and sticking around for 6 months, which will mitigate such costs.

The benefit of sucking up this one off cost of exploiting the unused 2013/14 allowance is that you end up with 5.7k extra inside your tax wrapper, which could not have otherwise fitted in your tax wrapper for the next 20 years.

£5760 in a 3% AER savings account that only gets 2.4 % net of basic tax or 1.8% net of higher rate tax, will over 20 years turn into about £9,256 for a basic rate taxpayer or £8,230 for a higher rate taxpayer.

£5660 (ie the 5760 less £100 of initial costs from messing about in 2014), in a 3% ISA with no interest lost to taxation, will over 20 years turn into £10,223. That is about 10% more money in your pot as a basic rate taxpayer and 24% more money for a higher rate taxpayer. With a headline rate of say 4%, the effect would be even more pronounced - because the net interest earned over the period is a relatively bigger portion of the total cash that is sitting in the pot 20 years down the line.

If you are the type of person who is unwilling to invest in S&S over such a long time period (yes these types of people do exist), yet is desperately trying to not lose too much to inflation (a very common goal), saving the tax might make the difference between keeping up with inflation and not.

Clearly at some points over the 20 years, as today, non ISA accounts after tax may beat ISAs - example, high interest current accounts with promotions to get you in the door and a capped amount that they'll pay interest on. At other points, ISA accounts with promotions to get you in the door will offer significantly better results instead.

Historically, banks offered higher rates on ISAs because - although the tax saving for ISA customers might allow them to get away with paying a lower headline rate - actually their exposure is limited because there's a limit on the amount people can add each year and consequently they can offer good deals in the hope they snag you as a long-term customer. Therefore we might assume the headline rates of ISAs are broadly as good as normal savings accounts in the long term, or at least only a bit worse, and so the value enhancement from saving tax is significant.

The approach is not a recommendation to anyone who is new to the game or does not match the optimum conditions (being a taxpayer, no projected space in annual cash ISA allowance for the next decade) but this site is all about being a money saving expert and so some people might be expected to want to optimise their circumstances with some fiddly tricks like this.