ISA or Long Term Fixed Rate Savings

cantseeme65

Hi People,

I have a small amount of cash I'd like to invest (less than 1000) and would like to add £25 to that lump sum each month. I am looking at a long term investment, probably 15 years min. Would I be best to save in an tax-free ISA (I pay base rate tax) or a high interest, long term, fixed rate account. I would really appreciate any help or advice as I'm totally confused - admittedly it doesn't take much! Many thanks.

Baldur

cantseeme65 wrote: »

I have a small amount of cash I'd like to invest (less than 1000) and would like to add £25 to that lump sum each month. I am looking at a long term investment, probably 15 years min. Would I be best to save in an tax-free ISA (I pay base rate tax) or a high interest, long term, fixed rate account. I would really appreciate any help or advice as I'm totally confused - admittedly it doesn't take much!

We seem to be talking about savings, rather than investment, as you mention interest.

The majority of fixed-rate accounts do not permit additional deposits after the initial one, or only permit them until the issue is closed to new savers - so they wouldn't be likely to fit your stated purposes.

The rates on nearly all savings accounts need to be reviewed at least annually and possibly transferred to a different institution, as they tend to fluctuate - what may be a good rate this year could be an appalling rate by next year.

If you look at the 'best buy' Cash ISAs listed here, something like First Direct's e-ISA pays 3% fixed until next November and allows additional deposits (up to your annual ISA allowance of £3,600 or £5,100 if you are 50+).

To achieve the same 3% interest in a non-ISA savings account, you'd need to find one that offers an AER of 3.75%.

Gymgenius

Are you prepared to lose any or all of your initial £1000 and monthly £25 payments?

If the answer is no, then Baldur is spot on with the Cash ISA.
If the answer is yes, then you might be better with a stocks and shares ISA.