Are cash ISAs a bit of a scam?

ES10

Doomcow wrote: »

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)

Well I think that 4% fixed for a year in this current climate is pretty good ...as I can't see that interest rates will improve much in the next year ...and if you think that ISAs currently paying on average 2% are better than the regular savings accounts ...then you're looking in the wrong places .....

dunstonh

Cash ISAs providers have been buying business for years and it appears they are not doing that as much now.

The main problem is the cost of running a Cash ISA is more than many savings accounts. Plus, the average cash ISA value is still quite low. Theoretically, ISA rates should always have been a bit lower gross vs gross but that wasnt the case due to competition.

That said the differences now are not that much and mainly is the small balances and immediate access ones that are suffering the most. Neither of which are profitable to the banks at this time.

RayWolfe

ES10 wrote: »

you must be feeling ever so smug !!

Smugness, doesn't come into it. I work hard to get the best rates. And that surely is what we all, as MSEs, should do. You may also note that I pass on a lot of that work to people who enquire within. The only point that was being made is that it takes time and effort to get the best deals and no bank is going to look out for your best interest, you need to do it yourself. I'm glad to see that you do.
Anyway, it's shame you don't watch Eastenders, I was hoping you could give me a synopsis of their latest doings ...

LesU

dunstonh wrote: »

The main problem is the cost of running a Cash ISA is more than many savings accounts. Plus, the average cash ISA value is still quite low. Theoretically, ISA rates should always have been a bit lower gross vs gross but that wasnt the case due to competition.

Why should running a cash ISA cost more than a savings account? All the business has to do, after initial setup, is an annual check and report to ensure no overpayment has occurred. There is no gathering of tax for the Government as you have to do with a savings account, and there is no maintenance of the tax status of individuals involved.
If the sticking point is the relatively low level of cash involved, why have so many ISA accounts in the past few years disallowed transfers from previous providers?

It certainly has been my experience that if you looked at any one establishment that was offering ISA's, they usually had a better rate savings account. These days, of course, the rate differences are converging because they are all getting lower.

ES10

So, general consensus, is that we should take the hit of a lower return on cash ISA's at the moment because in future they MAY come into line with standard accounts (if they ever were) as they will always have a tax advantage ???

Sounds a bit like that other one .....take out an endownment policy because in future it MAY pay off your mortgage and also give you a nice lump sum left over .......Hmmm??

I think that the banks have said - what are our most popular accounts? and what accounts are least likely to be closed/transferred ? ISAs !! ...so lets give a lower rate of interest on them then !

Lansdowne

The more money you have saved in total, the more valuable your existing ISA is to hold on to.
If you have only ever saved £1000 per year, it would be simple to re-establish an ISA in the following year, but if you had £20k or more and moved it all out of ISA, that' s 6 or so possible future years' tax benefits lost.

lisyloo

So, general consensus, is that we should take the hit of a lower return on cash ISA's at the moment because in future they MAY come into line with standard accounts (if they ever were) as they will always have a tax advantage ???

As a 40% tax payer it's a no brainer.
I guess most of the people with problems are basic rate tax payers?

You have to remeber that ISAs are curerntly tax free for LIFE.
I'm no youngster but that' potentially 4 decades for me.

I think you have to take a view.
If you think ISAs will be better rates long term then it probably is worth the LIFETIME tax free allowance.

The current situation we find oursleves in is unprecedented.
We don't know either way what will happen, but a lot of people would do well to consider paying off debts.

ES10

lisyloo wrote: »

You have to remeber that ISAs are curerntly tax free for LIFE.
I'm no youngster but that' potentially 4 decades for me.

That's what the CURRENT government is saying anyway ...do you really think ISAs will be around 4 decades from now???

Baldur

ES10 wrote: »

That's what the CURRENT government is saying anyway ...do you really think ISAs will be around 4 decades from now???

They (introduced in 1999) and their previous equivalent the TESSA, have already been around since 1991, so approaching two decades to date.

Whether they, or an equivalent tax free account, will be available in 40 years time is anybody's guess.

ES10

Anyway whether ISAs were a good thing for the future was not really the point of my thread - being ..

Why should banks and BS's be giving lower interest rates on ISAs than on normal accounts ?.

There has been one answer so far in that they cost more to run and are not so profitable for the banks ...someone else replied why should they cost more to run ?....so far no explanation for this ....so my conclusion is still that the banks are scamming us on these accounts and helping themselves to the tax break that should be ours