Are cash ISAs a bit of a scam?

ES10

My cash ISA with A&L has recently reduced to 2.5% and that includes a 1% bonus until May.....so I thought I should transfer....and what I noticed was that most ISAs consistently have rates below the normal accounts with taxable interest. For example B& B has an esaver rate of 3.6% gross which after tax is 2.88% but the maximum interest rate on
their cash ISA is 1.9% !!
I found this to be the case with most banks and BS's .....so what's the point?
It seems to me it's the financial institutions that are keeping the benefit of the tax saving ...it's not us thats getting it (maybe if you're a 40% tax payer).
Seems like a scam to me .... anyone else notice this???

cocktail

halifax variable rate isa-0.67%(pathetic)
halifax isa saver direct -2%
i think they are just reflecting the drop in the BOE interest rates. predicted to go lower this week.

dwh_3

If you'd been looking around a few months ago, you'd find that ISA rates are comparable to (or generally, taking into tax, higher) than savings rates, certainly for "clean" accounts with no other requirements, but this has changed somewhat with the dropping of interest rates over the last few months.

At the moment, there are many threads along the lines of "Are ISAs worth it these days?" and they generally end up saying "Perhaps not, right now, but you should probably fill it in by the end of the tax year, for the following reasons:
1) In the future, we will return to having decent interest rates, and having that money tax free forever will be benificial again
2) Good deals crop up around March, as the banks want people to open/transfer their ISAs there"

ES10

dwh wrote: »

If you'd been looking around a few months ago, you'd find that ISA rates are comparable to (or generally, taking into tax, higher) than savings rates, certainly for "clean" accounts with no other requirements, but this has changed somewhat with the dropping of interest rates over the last few months.

At the moment, there are many threads along the lines of "Are ISAs worth it these days?" and they generally end up saying "Perhaps not, right now, but you should probably fill it in by the end of the tax year, for the following reasons:
1) In the future, we will return to having decent interest rates, and having that money tax free forever will be benificial again
2) Good deals crop up around March, as the banks want people to open/transfer their ISAs there"

That may have been the case in the past ....and I really don't see why it should have to change just because interest rates are lower ...it still seems to me that the financial institutions are gaining the benefit of the tax not us ...it's just not right :mad:

delbut999

cocktail wrote: »

halifax variable rate isa-0.67%(pathetic)
halifax isa saver direct -2%
i think they are just reflecting the drop in the BOE interest rates. predicted to go lower this week.

Halifax rates now even lower 0.10% - 1.9% below base at the bottom end time to move

[FONT=Arial, Helvetica]Halifax ISA Saver[/FONT]
[FONT=Arial, Helvetica]Variable Rate Halifax ISA Saver[/FONT]
[FONT=Arial, Helvetica]UK annual rates: Rates are subject to change but are correct as at 1st January 2009[/FONT]
Balance
AER
Gross p.a.
£27,000+
[FONT=Arial, Helvetica]0.61%[/FONT]
[FONT=Arial, Helvetica]0.61%[/FONT]
£24,000+
[FONT=Arial, Helvetica][FONT=Arial, Helvetica]0.52%[/FONT][/FONT]
[FONT=Arial, Helvetica]0.52%[/FONT]
£21,000+
[FONT=Arial, Helvetica]0.41%[/FONT]
[FONT=Arial, Helvetica]0.41%[/FONT]
£18,000+
[FONT=Arial, Helvetica]0.37%[/FONT]
[FONT=Arial, Helvetica]0.37%[/FONT]
£12,000+
[FONT=Arial, Helvetica]0.22%[/FONT]
[FONT=Arial, Helvetica]0.22%[/FONT]
£3,000+
[FONT=Arial, Helvetica]0.15%[/FONT]
[FONT=Arial, Helvetica]0.15%[/FONT]
£1+
[FONT=Arial, Helvetica]0.10%[/FONT]
[FONT=Arial, Helvetica]0.10%[/FONT]

ES10

I like the suggestion from Cameron about no tax on savings income ...but would this give the banks another excuse to lower interest rates and reap the benefits of the tax saving as they seem to be doing on ISAs.....I wouldn't put it past them!

DarkShadow

With rates less than 2%, ISA are a big nono.

lisyloo

In any area of finance you can get ripped off if you are apathetic.

I'm getting 4.56% on my ISA compared with a mortgage of 2.49% (hence I'm loading my ISA first before paying off the mortgage).

I don't think ISAs are a rip-off.
You can certainly get ripped-off if you don't review your products, but I've always found cash ISAs paying more than competitive mortgages, so I don't see how that can be a rip off (when the banks pay you more than you are paying them).
Adminttedly you need a low LTV to do this and need to be on the ball and switch around (tart) but it's certianly not a rip-off in my view.

RayWolfe

Well said lisyloo.
I have a three and a four year FR ISA paying 6.15%. You just have to be alert. However if looking after your money is a bore and you'd rather watch Eastenders, well that's a choice. Personally, I wouldn't even buy cheese without knowing its use by date, let alone a financial product.

ES10

RayWolfe wrote: »

Well said lisyloo.
I have a three and a four year FR ISA paying 6.15%. You just have to be alert. However if looking after your money is a bore and you'd rather watch Eastenders, well that's a choice. Personally, I wouldn't even buy cheese without knowing its use by date, let alone a financial product.

Sorry ..but I take exception to that...I look after my savings very well ..I have transferred my cash ISA twice in the last couple of years ...once to get it out of IceSave several months before it collapsed as I was alert enough to watch what was happening....my A&L ISA started off at 6% and has steadily dropped over the last few months ...I've now managed to get a fixed rate at Northern Rock 4% for a year after many hours of searching ....and for the record ...I have never watched East Enders .... the whole point of this post was that I had noticed that most ISAs were below the normal interest rates of the standard accounts therefore making the tax saving irrelevant

Anyway good for you with your 4 year fixed rate ...you must be feeling ever so smug !!

Doomcow

ES10 wrote: »

.... the whole point of this post was that I had noticed that most ISAs were below the normal interest rates of the standard accounts therefore making the tax saving irrelevant

acutally after looking the other day (things might have changed now though seeing what life is like), ISAs still provide interest at a higher rate than regular savings minus the tax, albeit only by points of a percent, its still something and it stay tax free as long as you have it, so as interest rates (incl ISA rates) go up, you'll benefit more from accumulated cash.

All these people mentioning their ISA rates have dropped and they now cant find a new one with a good interest rate - have they not been watching TV / the news and know that interest rates have significantly fallen in general? Do they not expect their rates or the tax free BoE rate tracked rates to fall?

Sorry to sound like a moanyface but i have an ISA too which feels like its been humped, but is in fact sticking in line with general itnerest rates.

its true, you have to keep an eye out for the best deals. (and fixed in this current climate? are yoo seriousssss?! wish i had enough money i could ignore it for so long)