Do I need a cash ISA?

yowza

My question is whether there is any advantage in my starting ISA savings this week.

I'm 59 years and hope to return to employment (basic tax rate) sometime this year.

I have £30,000 in a 50+ access saver paying 6.4% gross - this first year rate will drop substantially (I expect) in May this year.

I also have £45,000 in a 1 year fixed rate bond paying 6.9% gross - this ends in November this year.

ISA interest rates are obviously currently much lower than the above. But is there a financially sensible reason for me to get onto the tax-free ISA ladder now?

Lokolo

Yes because you will pay tax on the interest whereas in an ISA it won't....

Actually you won't. Currently you get about £5k interest. I assume your tax code is 6 something or rather.

Does pension count as taxable income though? (I don't know) If it does then ISA is best, if not, don't worry about it and just go for highest rate.

Baldur

It depends, longer term, whether you wish to build up a 'pot' of savings which will give you ongoing tax-free interest.

£3,600 subscribed to a Cash ISA before the 5th April, plus another £3,600 subscribed after 6th April (e.g. when one of your higher interest accounts matures/receives reduced rate) would give a better start to such a pot than just your £3,600 allowance for 2009/10 - if not used your 2008/9 allowance is lost forever.

Many of us who have used our full Cash ISA (and the previous TESSA) allowances since the scheme began in 1999 will have around £50k earning tax-free interest at the moment (at 6.5%, and 6.2%. at the moment, in my case, until FRISAs mature).

yowza

Thanks for your replies. I do want to build up my savings pot, particularly with retirement in mind. I don't understand pensions/annuities at all, but assume all my savings will become tax-free whenever I stop work finally (e.g. 6 years to 65). I guess I just need to do the maths, inclusive of variables.