ISAs - do you need them?

Jake'sGran

There is something I forgot to mention and that is cash ISA rates which always seem to be less than other savings rates. I have never understood why this is except for the banks and building societies taking advantage...again, assuming that the many people who do buy ISAs won't bother to work it out.

I have bought ISAs and it has turned out to be the right thing to do as some of the PEPS I bought have done very well and I therefore don't have to worry about CGT. It's just annoying that as a result of developing a serious health problem I have nothing to spend it on, except my family!.

rb10

Jake'sGran wrote: »

There is something I forgot to mention and that is cash ISA rates which always seem to be less than other savings rates. I have never understood why this is except for the banks and building societies taking advantage...again, assuming that the many people who do buy ISAs won't bother to work it out.

Not necessarily. I think (from memory) that it's Opinions4U who has, on several occasions, pointed out the following to people who have said much the same as your comment:

* ISAs have more regulations, etc, than other savings accounts, so there's an additional cost to the bank in maintaining them - hence the interest rate would be expected to be lower.
* ISAs typically have lower balances than normal savings accounts (on average), so the 'cost per £1 saved' is much greater.

So there are very real reasons why you would expect an ISA rate to be lower.

RayWolfe

Don't forget Age Allowance.
I you have an income greater than c. 23k, Age allowance (c. 9.5k) is clawed back. However, ISA income and NS&I tax free do not count as income for this calculation.
Lots to think about other than just the interest rates.

Primrose

I've never really understood why so many people take so little interest in their financial affairs and don't try to educate themselves as to how, with just a little financial knowledge, they can literally save themselves thousands of pounds over their lifetime, by seeking out the best interest rates, using ISA tax breaks, and over-paying their mortgage debt when savings interest rates are lower. A lot of this stuff isn't rocket science. Individual savings in each of these areas may not seem huge but accumulated over the years, they can reach eye watering amounts. At the beginning of their working life, if an individual were to do all these things and put the amounts saved into a special account, they would reach retirement with a nice little nest egg. PEPs & ISAs are a particular case in point because anybody who subscribed to them from the beginning and used their full allowances now have a nice sum of tax-protected savings. And for older people, with taxes (direct & indirect) about to rise after the General Election and stay high for many years to correct our national debt, that is a benefit worth having, quite apart from not having to declare it on your tax return.

missile

Jake'sGran wrote: »

It's just annoying that as a result of developing a serious health problem I have nothing to spend it on, except my family!.

That is so sad. I am sure you derive pleasure from giving to Jake but there must be something you would like for yourself?

Jonbvn

Primrose wrote: »

I've never really understood why so many people take so little interest in their financial affairs and don't try to educate themselves as to how, with just a little financial knowledge, they can literally save themselves thousands of pounds over their lifetime, by seeking out the best interest rates, using ISA tax breaks, and over-paying their mortgage debt when savings interest rates are lower. A lot of this stuff isn't rocket science. Individual savings in each of these areas may not seem huge but accumulated over the years, they can reach eye watering amounts. At the beginning of their working life, if an individual were to do all these things and put the amounts saved into a special account, they would reach retirement with a nice little nest egg. PEPs & ISAs are a particular case in point because anybody who subscribed to them from the beginning and used their full allowances now have a nice sum of tax-protected savings. And for older people, with taxes (direct & indirect) about to rise after the General Election and stay high for many years to correct our national debt, that is a benefit worth having, quite apart from not having to declare it on your tax return.

I've never really understood why so many people take so little interest in using paragraphs;);)

BTW, good article in the Torygraph about the increased ISA allowance.
http://www.telegraph.co.uk/finance/comment/tom-stevenson/6244460/Isa-handout-may-be-a-sop-but-investors-should-seize-it-with-both-hands.html

The ability to shield more than £20,000 a year from the taxman means that most families need never worry about income tax or capital gains tax on their investments.

Jake'sGran

missile wrote: »

That is so sad. I am sure you derive pleasure from giving to Jake but there must be something you would like for yourself?

I couldn't use my computer last week and therefore didn't see your kind remark. People would say "that's life" but I must admit to being very disappointed.

Jake has a brother and they have both done very well at school. The eldest is now at Sheffield University and is lucky in that he is being sponsored by a large German company. Jake is brilliant at Maths. He got 9 GCSEs, all As - 4 starred. As their parents earn too much for them to get the £40 per week other students get to make up for not working they are looking to me to provide spending money. I don't mind.