Cash in our ISA's?

Steveorr

My wife and I invested some money recently(October). We looked to MSE for advice and decided to open a cash ISA each with Barclays. The rest we put in the Coventry BS over 50's. The Coventry is no longer offerring this account but when we opened it it guaranteed the rate for 12 months.(Gross 6.08). Whereas Barcllays Tax Heaven ISA is down to 4.08 and in all likely hood will drop to 3.08, as it has been following the BoE rates, all be it tax free.

Simple maths tell me to cash in the Barclays ISA and put it in the guaranteed Coventry account for the next 10 months.

Or am I missing something?

Lokolo

I am assuming you are rate tax payers...? If so yes, but only upto the 12 month rate, as soon as thats finished, it will drop and you will have regret not keeping your Barclays ISA as you won't be able to deposit the money back in.

Also is the gaurenteed rate a fixed rate or bonus rate? Fixed rates don't usually offer more than 1 deposit.

Steveorr

The interest rate is fixed for the first year from the date the account is opened. Thereafter the interest rate will be variable. So obviously we would shop around at that point.

Lokolo

Indeed but you wouldn't be able to put it back in ISA. If you are planning to save another £7200 next tax year (2x ISAs) then you will lose out on an ISA if you take money out of this years one.

Primrose

Yes, I think you probably are missing something. I'm assuming that the money in your ISA has been put away for the long term. If this is the case, it would be foolish to cash in your ISA as you and your wife, if you're taxpayers, will lose this tax free allowance for ever. Taxes are inevitably going to rise heavily over the next few years to pay for Gordon's borrowing, so it makes sense to shield as much of your savings as possible from tax now. If I were in your position I'd wait until the latest round of interest rate reductions have hit the deck and then compare ISA rates with a view to transferring your ISA's elsewhere, if you can get a better rate. But don't cash them in as you'll lose the tax free status. Transfers have to be done through the outgoing and incoming providers - you apply for a transfer form through your current provider. Hopefully your ISAs will be tax free for ever, so in the longer term you'll save money over a shorter term move to a taxable savings product, even if the latter is paying a slightly higher rate.

LandM_2

Our Maxi ISAs were taken out much longer ago 2000 and 2001 respectively. We've seen the 3 ISA accounts dip and halve in value around 2004-5 and this summer they were finally reaching the beginning amount first deposited (15K). A recent statement tells us they are on their way down again and we're wondeirng whether just to cut our losses and cash them in - current value just over 14K or should we transfer them to a higher interest (if there's such a thing) provider ?

Primrose

LandsM - I'm assuming that your ISA accounts are equity ISAS as if they were cash, their value wouldnt't have dived so much. I think if your're in unit trusts, unless you desperately need the money now, you would be better to hang on. If you cash them in, you will lose their tax free status, You can now move your Cash ISAs into equities ( i.,e. unit trusts, etc) but you can't move the other way, i.e. move your equity based ISA's into back into Cash ISAs. What you are seeing at the moment is a paper loss. It won't turn into a real loss until you cash them in, at which point your investments will lose their tax free status. There are many of us on here ( including me) who are in a similar position. I'm just gritting my teeth and hanging on in there. One of the reasons for my doing this is that I foresee a time not too far distant - when taxes are going to rise massively to pay for current government borrowing, so every penny of my savings I can legitimately protect from the tax man, I will do so.