ISA v Fixed rate savings

alanmo

In view of the painfully low ISA rates now on offer, would it not be better to cash them and invest in a fixed rate bond....currently paying a lot more interest than ISA even with the tax benefit

gozomark

why not a fixed rate ISA ?

Energize

gozomark wrote: »

why not a fixed rate ISA ?

Took the words out of my mouth.

BM 4.2% fixed, which is equivilent to 5.25% on a savings account.

Paul_Herring

alanmo wrote: »

In view of the painfully low ISA rates now on offer, would it not be better to cash them and invest in a fixed rate bond....currently paying a lot more interest than ISA even with the tax benefit

It all depends on how many years you have in at the moment, and how long you were planning to hold onto the cash ISA ignoring the current situation. You may have a short term gain, but if you were planning on holding them for any length of time, that gain could be wiped out by the tax free interest you'd be missing out on a few years down the line.

savetilibleed

alanmo wrote: »

In view of the painfully low ISA rates now on offer, would it not be better to cash them and invest in a fixed rate bond....currently paying a lot more interest than ISA even with the tax benefit

If like me you have almost the full investment that was possible in cash ISA's over the years, then you possibly would not want to start all over again when there is an upturn. My ISA is with YBS and although still OK just now, I ought I suppose to fix it.

VfM4meplse

I wouldn't take out of an ISA to re-invest in another non-ISA product because you will lose any tax advantage on those savings forever.

Robert_Sterling_3

Move the ISA to a fixed rate ISA. Aim to get 4% or more.

StevieJ

The ISA has other benefits, e.g. it does not count in the calculation of income for reducing the age allowance when you reach state pensionable age.

savetilibleed

StevieJ wrote: »

The ISA has other benefits, e.g. it does not count in the calculation of income for reducing the age allowance when you reach state pensionable age.

Interesting, I didn't realise that. Just to clarify, are you referring to interest from ISA's? My OH, who is pensionable age, has a £3000 ISA and pays no income tax due to little income. We have recently moved some money to her so she can get interest gross rather than me pay tax on my tiny income (but my income from savings is enough [not sure for how long though] that I can't fill out an R85).

StevieJ

savetilibleed wrote: »

Interesting, I didn't realise that. Just to clarify, are you referring to interest from ISA's? My OH, who is pensionable age, has a £3000 ISA and pays no income tax due to little income. We have recently moved some money to her so she can get interest gross rather than me pay tax on my tiny income (but my income from savings is enough [not sure for how long though] that I can't fill out an R85).

The age allowance issue is only applicable if you have earnings over (currently) 21,800.

Extact from HTA site.

f your income in 2008–09 is above £21,800, you will lose some or all of your age-related allowance. In order to work out the reduction, you must first work out your total income. Add up interest on investments or savings, the grossed up dividend income, and other income including pensions and earnings on the calculations sheet Ignore any tax-free income.

wilksy007

Me and My GF have recently taken alot of our savings (£17k) out of ISA's and put it all in a Halifax fixed rate savings account at 5%, which is fixed until December 2009.

I think it was right for me, as by december I will probably start to look for a property. If it were long term savings for the future I wouldn't have done it.