Are cash ISAs a bit of a scam?

TrickyDicky

Are you forgetting banks are out to make money? they are not your friends, and they are not obliged to give us any decent savings rates - that all comes through competition.

With banks making large losses on debts they gave out, these BOE cuts are not being passed on in full to mortgage holders and being pass on and then some to savings holders. It may not be fair, but its life and business.

The total borrowings in the country are greater than the total savings in this country, so borrows have more power to complain when they dont get the full benefit, on top of the fact of extra costs involved when chasing missed debt payments. It just doesnt cost so much to try to keep savings holders. (chasing debt involves lawyers and court fees, alot more than a low paid telephone operator on the end of the phone to read a script at you to say why you shouldnt move your money).

So if you have to plug your bad debts, what do you do?

Innys

ES10 wrote: »

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?

I think the short answer to this question is "Because they can."

Don't count on this, or any, Government coming to the ISA holder's rescue either. There are no votes to be won by defending/rewarding the prudent.

Life's not fair - just learn to deal with it.

LesU

Innys wrote: »

I think the short answer to this question is "Because they can."

Don't count on this, or any, Government coming to the ISA holder's rescue either. There are no votes to be won by defending/rewarding the prudent.

Life's not fair - just learn to deal with it.

Isn't the point of these forums and this web-site to highlight where banks and financial institutions are taking advantage and steer people clear of them? As long as there are separate companies and the whole thing isn't run as a state-controlled, fixed industry, then there will be competition. Sooner or later someone will seize the opportunity to get your money by offering more than their competitor.
As long as the internet and forums like this remain, then we can make life just a little less unfair.

lisyloo

do you really think ISAs will be around 4 decades from now???

Well actually I do (although the name might change).
I think governments will always want people to save to keep them off state benefits.

But anyway, let's assume it's one decade.
Are you saying that's not worth having???

We have a five figure sum in ISAs and pay 40% tax, so I think it's worthwhile for even 1 year.
If it's stops at some time in the future then it will stillbe worth having whilst it's around, but I can't see why a government would NOT want to encourage people to save and people DO need encouragement.

bronzemonkey

Even as a BRTP, cash ISAs make sense. The possibility of not maximising the interest earned, in the current climate, on the money in a cash ISA is outweighed by the benefits of increasing the total amount of money sitting in these tax-free accounts. Actively taking money out of an ISA, for reasons of interest rate, doesn't seem to have any benefit other than possibly scraping an extra few percentage points in the short term.

sdooley

ISAs cost more to run for the banks because they have to make an annual return to the Revenue of the ISA holders and the balances held, plus the costs of ensuring that people haven't naughtily opened up more than one cash ISA in a year (or opened a cash ISA after maxing out a shares ISA) are borne by the banks.

Banks are legally responsible for policing the deposit limits, which is simple enough for someone who simply deposits the £3,600 but where deposits and withdrawls are made through the year, although it is largely automated, the bank does need to deal with rejecting overlimit deposits.

Another reason the ISA may not pay as well is that many accounts are most attractive to the banks for the small number of people who will deposit very large amounts - they can get a suprisingly high proportion of their overall deposits by value from the few people with deposits in the tens or hundreds of thousands even on ordinary (non- money market) accounts.

ES10

lisyloo wrote: »

I think governments will always want people to save to keep them off state benefits

Well they certainly aren't encouraging that with interest rates now at their lowest since the 17th century

But anyway, let's assume it's one decade.

OK but surely it's all about return? ..if say for 10 years I can get a higher return on a normal account after paying the tax???

We have a five figure sum in ISAs and pay 40% tax, so I think it's worthwhile for even 1 year.

Yes - they make sense for 40% tax payers and I said that right at the start