Cash ISAs vs Fixed Rate Bonds: Which to go with for savings?

bgscotty

Hello,

I'd be grateful for advice.

I currently have 2 ISAs from previous years totalling £7200. I haven't opened an ISA for this year. Ideally, I'd want to transfer in these previous years' amounts in addition to the full allowance for this year.

I also have an additional £6000 I want to save somewhere.

My question is whether Cash ISAs are still a good place to save or should I withdraw the £7200 and save it in another type of account? If not, is it better to save in a fixed rate cash ISA? Any recommendations?

I've heard that fixed rate savings are the best option just now and wonder which ones are recommended? I don't need instant access to the cash for a minimum of 2 years.

Basically, I'm wondering whether to save in an ISA AND a fixed rate savings account, splitting the money between both.

I'd welcome any advice, please.

Thank you.

MiserlyMartin

I wouldn't take out a fixed rate because I don't want to lock the money up for 3 years or more to get a half decent rate. And then when interest rates rise you will be stuck with it. ISA's are paying such poor rates at the moment even though they are tax free it almost makes a decent fixed rate account more feasible than an ISA. Best thing to do is do the sums. I have been in no hurry to open an ISA this tax year because I still had 6.5% fixed savings accounts which even after tax, beat the best ISAs by miles. Now they are expiring I am now looking at them. Good luck, sorry to be of not much help but I felt llike spouting :beer:

td_007

bgscotty wrote: »

My question is whether Cash ISAs are still a good place to save or should I withdraw the £7200 and save it in another type of account? If not, is it better to save in a fixed rate cash ISA? Any recommendations?

If not needed, do not lose the ISA wrapper - the tax free status is the key. The best instant access ISA gives 3% (Abbey). To get the same return after tax you need a savings a/c paying 3.75% (20% tax) or 5% (40% tax). A quick scan and you will see not very many accounts can match up unless you are prepared to commit for extended periods of time in the course of which better offers might come up but you will have to let them pass.

bgscotty wrote: »

Basically, I'm wondering whether to save in an ISA AND a fixed rate savings account, splitting the money between both.

Given the very dynamic interest rates for savings a/cs, it would be better to split between an instant access ISA which will give you the flexibility to move should you get better rates elsewhere and a savings account depending again on the flexibility you want - the best instant access savings is Egg with 3.35%. Two year fixed give better rates.

Alternatively, if you are prepared to put in a bit of effort you can go for current a/cs from A&L or Abbey where you will be able to save upto £2500 @6% for 1 year (there are funding requirements that you need to be aware of).