ISA vs Fixed Rate Savings?

hockeyjo

Dear all

I have a moderate amount of savings and each year I have been dutifully using up my cash ISA allowance.

Now I see that the cash ISA rates have plummeted, in many cases below what I can get for a 1 year fixed bond.

What do I do? If I take the money out of the ISA's then the allowances (for several previous years) will be lost forever - so when the rates start going up again I might lose out. But at the moment they are looking like a poor choice.

Any thoughts?

mini_lidi

Keep with the ISAs

whu

I would suggest keeping the ISA as it is tax free and the accumulated value will be worth keeping when rates go up in due course - also as you say you will lose the benefit of the tax free ISA if you close it

emma396

How about a fixed rate isa? prob not as high as non isa, but at least it's fixed

LesU

Why not start planning for next year's ISA now? Take out the best savings rate fixed you can find. If it is an ISA then great, but otherwise any 12 month fixed rate savings that is paying the best. Then, at the end of the 12 months i.e. March, transfer it into a good rate ISA. You will have earned a decent rate for 12 months and not lost the tax status.
If you can't find a savings account paying better than 20% more, then your answer is simple, invest in an ISA.

Primrose

I think LesU's suggestion has some merit unless you are a higher rate taxpayer, in which case, even if the ISA interest rate is lower, you are protecting your savings from tax for the whole 12 month period. However, if you're saving in ISAs for the longer term I think they are still worth hanging onto. Tax rates are bound to increase and stay higher for years to come, whatever government is in power. Somebody has to pay for the financial mess this country is in, and this is why tax free savings, especially if you have built up a sizeable pot of them, will be worth having.