ISA v Savings account

Bar-Bill

If my ISA pays 0.5% £1000 after one year pays £5 tax free
If my savings acc pays 3% £1000 after one year pays £30 less 20% tax £6 = £24 = £19 better off
Or am I reading things wrong

ses6jwg

You are reading things right.

But why stick with such a poor ISA?

You are aware you can transfer out?

You can earn up to 4% TAX FREE if you lock it away for a couple of years.

Bar-Bill

I dont want to lock it down for 2 or more years and to get the best rate I need to do it on-line no problem there, but I need to then change again after a year. I will be changing my provider but I work all day and dont have the time to do anything about it right now
My main thought was why are people banging on about Isa's when there are better deals for savings accounts

rb10

If you have time to open a 3%+ savings account, then why can't you open a 3%+ ISA as well??

If you're stuck for time, you could just open First Direct's 3% ISA. Fixed rate (for one year), instant access, apply online, and they'll send you a form in the post to complete the transfer.

ses6jwg

Bar-Bill wrote: »

I dont want to lock it down for 2 or more years and to get the best rate I need to do it on-line no problem there, but I need to then change again after a year. I will be changing my provider but I work all day and dont have the time to do anything about it right now
My main thought was why are people banging on about Isa's when there are better deals for savings accounts

Because over time the Tax-Free wrapping of an ISA will outweigh the extra few percentage points you can earn in a normal savings account.

You don't have to lock any money up for 2 years if you don't want to.

ISAs are actually quite competitive the examples you have given there are not fair because you are comparing a poor ISA with a good instant access.

A good ISA instant access will pay 3%

A good instant access savings account will pay around 2.7%, after tax.

Also, switching every year is not limited to ISAs, they do it for normal accounts as well.

The banks realise that most people are too busy or too lazy to move their savings around, so they rope them in with a 1st year deal then pay a pittance after that.

Don't let them win.

d712

One of the best things I did was open a 4 year fixed rate ISA bond in April 2008 with Halifax at 6.2%. What I'm thinking of doing in April is transferring the money I have in a cash ISA (which is not locked away) into the two year Halifax fixed rate ISA saver so that both accounts will mature simultaneously.

However, I'm really stumped on what to do with the cash I plan to put in an ISA over the course of the next tax year. Unfortunately I won't be able to put in the whole year's allowance on day 1 so I will need an ISA that will allow me to make deposits over the course of the year. Halifax is offering a derisory 0.5% for this...

Is there anything out there which is offering something better for ISAs that allow you to make further deposits over the course of the year?

Thanks

d712

On the other hand, is it likely that, towards the end of this tax year, better offers will appear? This year I've had an instant access 3% fixed rate cash ISA and was hoping for something like that again, not 0.5%!

lisyloo

but I work all day and dont have the time to do anything about it right now

Hi Bill,

I recently switched to first direct.
Took me about 10 minutes but I was already a customer so might take slightly longer.

The value in ISAs is being tax free for LIFE.
That compounds, so over decades it's a VERY valuable benefit.

I would encourage you to look at the 3% ISA with FD.
There is no penalty so you can move if something better comes along.
But you will be in the same posisiton next year.
I'm afraid if you want the best rates, you have to spend a small amount of time each year switching.
Apart from research the switch rarely takes more than 30 minutes per year.

Primrose

I think lisyloo is right to remind you not to lose sight of the fact that ISAs are tax free for life, so if you are able to commit surplus funds to this savings route, over the years you can build up a considerable tax free nest egg. Interest rates won't stay low for ever and there are some fairly reasonable ISA interest rates around if you search. With tax rates bound to rise in the future, permanently protecting your savings while you can is worth doing, even if in the short term, you may earn somewhat less interest on an ISA than an ordinary savings account.