Share Isa with 'Cash-like' product

michaels

The limit for cash isas is 3k pa, but the limit for maxi isas is 7k. There are various products on the market such as 'gaurenteed stock market bonds' that pay x% of the market rise but suffer no capital loss on market falls.

I wondered if any enterprising company had lauched any guarenteed return investments that would qualify for share isa status but actually pay a safe tax free return more like cash isas (obviously there are issues around what rate is available and entry/exit charges)?

cheerfulcat

Can't do it. S&S ISAs are meant to be risky;safe or guaranteed products are not allowed! Daft, really...

michaels

But surely you could short and long the same 3 month govt bond (can't get much more risky than options trading after all...) to give a net return equal to Libor?

cheerfulcat

AFAIK you could go short but you definitely can't be long short dated bonds within a maxi ISA. If you are thinking of a product which did this for you then the "guaranteed products not allowed" rule would come into play...

Chadsman

You could buy a cash fund within a shares ISA.

cheerfulcat

Nope, not allowed. Nothing with a guaranteed return of the original investment, whether that guarantee is explicit or not.

isasmurf

'Cash-like' investment products will be treated as a Cash ISA and count towards your Cash allowance.

michaels

cheerfulcat wrote:

Can't do it. S&S ISAs are meant to be risky;safe or guaranteed products are not allowed! Daft, really...

Is there any definition of what makes a product risky tho? Are there not any products that are risky enough to be classed as non-cash but under all likely scenarios give a certain return?

cheerfulcat

" Risky " is " not certain to return any or all of your original investment ". Not an official definition but that is the way HMRC approach it ( there is no *official* definition anywhere that I can see; as usual they are making it up as they go along. ) Anything that as you say is "risky enough to be classed as non-cash but under all likely scenarios give a certain return " is by definition not risky ! Or not risky enough for a S&S ISA, anyway.

Chadsman

If the underlying investments can be bought and sold on the currency exchange markets they dont go into a cash ISA but a shares ISA. There are funds that invest in cash. The returns are not guaranteed- the fund can lose out eg on exchange rates.

cheerfulcat

Cash funds may not be held in a stocks and shares ISA.

If the underlying investments can be bought and sold on the Stock Exchange they dont go into a cash ISA but a shares ISA. There are funds that invest in cash. The returns are not guaranteed- the fund can lose out eg on exchange rates.

The underlying investments in money market/cash funds are cash deposits, which are not bought and sold on any stock exchange.

Here's what HMRC have to say

" ...any collective investment scheme allowed into the ISA will also be subject to a ‘cash-like’ test, to limit those promising cash-like returns on investment to the cash component of the ISA. "

I'm not saying that any of this makes sense, or that I approve of it or anything, because it doesn't and I don't. But them's the rules...