ISA. What to do?

fluffyscruffy

Hi, My BF has an ISA with the Halifax worth around £10k. As the FTSE has risen above the 6000 mark, he is considering cashing it in. He is a higher rate tax payer, and with the attraction of the ISA being tax free would this be a prudent move?

Also if he does cash it in can anyone suggest a good place to put the funds, other than using it to pay off part of his mortgage?

Thanks, Fluffyscruffy

lipidicman

'As the FTSE has risen above the 6000 mark, he is considering cashing it in.'
Why? Does he think the market will fall now, or do you need the money to spend?

'He is a higher rate tax payer, and with the attraction of the ISA being tax free would this be a prudent move?'
I am not sure what you are getting at
If he cashes it in he will have to start paying tax on any interest it earns. 'Being tax free' shouldn't be an incentive to cash it in, quite the reverse.

We will need a little more info I'm afraid

dunstonh

Hi, My BF has an ISA with the Halifax worth around £10k. As the FTSE has risen above the 6000 mark, he is considering cashing it in. He is a higher rate tax payer, and with the attraction of the ISA being tax free would this be a prudent move?

In addition to lipidicmans comments, why has he got 10k sitting there invested in large caps only anyway? The FTSE100 has been the worst performing UK equity sector over the last 5 years. Although no-one has a crystal ball, there are some doubts on the levels of profit being maintained from these large caps. Although others have suggested that mergers may help. So the outlook for FTSE100 isnt great.

Should he keep it in the ISA - Yes. Should he keep it all in the FTSE100 - No.

It just needs some diversification and selecting around 7-10 funds with amounts/spread to match his attitude to risk.

The FTSE100 isnt an indication of whether you should have an ISA or not. You can have a stocks and shares ISA that invests anywhere in the world or not even in the stockmarkets.

Are you sure its also all in the FTSE100? You wouldnt believe the number of times people assume their investments are linked to that when they are not.

Chrismaths

If you're asking will the FTSE fall from here - nobody can answer that question anymore than you can forecast the weather in 10 days time. It will fall and rise and fall and rise, as that's the nature of the beast. It's a pretty safe bet that it will be higher in 10 years time than it is now, It's a slightly more risky bet that it'll be higher in 5 years, a highly risky bet that it will be higher in 1 year, and a gamble that it will be higher in a month.

fluffyscruffy

The BF thinks that with the uncertainty in the Middle East and the possiblity of a future conflict with Iran, oil prices my well rise as demand could out-strip supply. This could cause the FTSE to fall, and trigger a rise in inflation etc. (though obviously not overnight). With this posibility in mind, do you think it would be wise to cash the ISA in now while the FTSE is high, and put the cash into a savings account?
He doesn't need to spend the cash.
I suppose in a nutshell, would it be prudent to accept having to pay tax on interest gained from a saving's account, or hang onto the ISA and see what happens?

lipidicman

duplicate post, sorry

lipidicman

Cash savings dont fare to well if inflation rises......

...I'm not sure about your solution or your analysis of the economy.....

I think it would be wise to seek professional advice, or at the very least investigate what dunstonh suggests above as it is sensible advice. Your solution is not

dunstonh

With this posibility in mind, do you think it would be wise to cash the ISA in now while the FTSE is high, and put the cash into a savings account?

As already said, is he in an ISA fund that tracks the FTSE100?

If he does have concerns, then why not revise the funds to reduce his stockmarket holding. If, as you suggest, he only has fund, he could be changing his fund selection regardless of whether he stays 100% in the stockmarket or not.

The ISA is just a tax wrapper. Its a product you place investments into. You dont come out of the ISA just because one fund (of around 7000 funds available with collectives) doesnt satisfy his needs.

The BF thinks that with the uncertainty in the Middle East and the possiblity of a future conflict with Iran, oil prices my well rise as demand could out-strip supply. This could cause the FTSE to fall, and trigger a rise in inflation etc. (though obviously not overnight)

And wouldnt the oil companies do well in the short term if that happened. Oil companies have a heavy weighting in the FTSE100. If you believe oil is going to cause many problems, they why not switch the fund to a natural resources fund as they would do well in the scenario you mention.

Debt_Free_Chick

Just to reiterate what dunstonh says .....

Problem - Your boyfriend is concerned about a fall in the FTSE100

Solution - move any investments in the FTSE100 to other funds.

The solution is NOT to cash in the ISA - but to use different funds.

Even if he were not concerned, he has all his eggs in one basket - it's generally a good idea to spread it around a bit (diversify) so that if one market performs poorly, only part of your investments are affected.

roswell

is the question not that he has changed his outlook to risk ?? If this is the case then he need to change what he is invested in or cash out the isa.