Am I mad to leaving my money in the NS&I Direct ISA?

Marcheline

Hello all, I currently have the product named above with a balance of approx £10k and I am earning 3.3% interest: I took out the account in 2006 when it was the top-paying ISA and I was working at that point. I am no longer working as I now have a child and do not plan to return to work for the foreseeable future. My question is: should I move the money to my Halifax Guaranteed Saver (paying a fixed rate of 6.25% until July 2009) or keep it where it is?

At face value, I realise I should move the money, but I have been worried about the security of HBOS and so keep putting it off. Although deposits in banks are underwritten by the govt. up to £50k, I do not entirely trust them (!) Am I being very foolish not to move the money? Finally, if I do move the money (which I think you will advise me to) do I need to think about any tax implications of moving money from the ISA to a regular account? Many thanks in advance for any helpful comments.

tradetime

do I need to think about any tax implications of moving money from the ISA to a regular account?

Not sure which "tax implications" you are referring to, there is nothing to stop you giving up the tax free benefits of your ISA in favour of a taxable account. On the other hand if it is the implication of giving up that tax advantage, then yes, it is something you should consider, as once you take it out you cannot put it back in, and you will have to build up that level over time if you want it again.
The Halifax rate should really read 5% net (unless you are able to claim the tax back) as that is what it is to you after tax, when considering and comparing ISA's and non ISA products, I like to get to the tax adjusted figure. Unfortunately banks give the impression they dislike tax free savings since the rates generally seem to be below other taxed savings when adjusted. Personally I think it is just the banks taking the opportunity to dip their hand into you tax allowance by offering a lower rate, but I digress.
As far as HBOS's safety goes, I would imagine any big bank now is safe from a savers perspective as I am certain the government will bail any failing institution out now. So that just leaves the question, is it worth giving up a tax shelter, that at current levels takes 3yrs to build in order to secure 1.7% for another 6 months. I'd say no, probably not if it were me.

Marcheline

Thank very much for your advice. I am not currently working though, so in my situation, would you move the money to the Halifax account?

tradetime

Marcheline wrote: »

Thank very much for your advice. I am not currently working though, so in my situation, would you move the money to the Halifax account?

Ah, now what I would do and what you should do, are not necessarily the same thing since I can guarantee our circumstances are dramatically different, that is not meant to be a flippant put off, it does make a huge difference, and means as much as I try to think myself into your position, I will most likely fail miserably. So I can only throw figures at you. Come July, that rate will change dramatically so you will have 6 mnths with the 1.7% (oops since you are not working I assume thats a 2.95% advantage) this will net you a gain of £147.50 approx, assuming you can dump the full £10k into that account at once. For me personally, I'd rather keep the tax allowance even at the lower rate tax, I can imagine a time where tax advantaged savings may become much more valuable.

Marcheline

Many thanks for your thoughtful comments. Input from others would also be appreciated, if anyone else cares to add anything?

binkyb

I am in exactly the same position as you re the ISA. I too have £10k in NS&I direct Isa & am not working (hopefully will be soon) and keep wondering what I should do about it. It drives me so mad thinking of all the options I end up doing nothing. I am not looking to put it in a regular savings account though as I don't want to lose the tax free allowence I've spent 3 years building. I just want to move to another ISA.
I also have £16,000 with birmingham midshires, about to move to tesco but don't know if I've done the right thing there either! AGhhhh

Marcheline

I know, it's been driving me mad too, so I've just kept putting it off!

tradetime

binkyb wrote: »

I am in exactly the same position as you re the ISA. I too have £10k in NS&I direct Isa & am not working (hopefully will be soon) and keep wondering what I should do about it. It drives me so mad thinking of all the options I end up doing nothing. I am not looking to put it in a regular savings account though as I don't want to lose the tax free allowence I've spent 3 years building. I just want to move to another ISA.
I also have £16,000 with birmingham midshires, about to move to tesco but don't know if I've done the right thing there either! AGhhhh

Yours is slightly easier to comment on, just do a search on the comparison sites to find out what the best rates for ISA's are and filter that by what allows transfers in. As for your BM, it rather depends purely on what the best interest rates are and any guarantees that may exist as to their future interest rates, or whether they have already taken into account the recent rate drop, there is also a consideration on the time taken for the money to move from one account to another, and any loss of interest that might occur during the process.