when do people get their new isa's

lilacbridget

With the isa deadline looming I was wondering when people subscribed to a new isa. Personally im hoping the santander isa will still be available come april. But im aware that some of the best offers get introduced in the march when i've already funded my isa. Im aware that i would lose out on 1 yrs tax free interest but would be earning 4.8% interest on the money whilst not in the isa & would obviously put it into the best available isa in the march.

With the guarantee that the santander isa would match any base rate rises I dont feel the decision is as important this year, but in principal, should this isa be withdrawn or in a climate of possible base rate rises, would it be better to wait to the end of the new financial year when interest rates may well be higher & i would be able to pick up a higher fixed rate deal etc.

Baldur

Although there is a widely held assumption that Cash ISA rates on offer are better towards the end of each tax year, I can't recall having seen any actual evidence to support this general assumption.

From memory, most providers' rates that are available in February/March, to 'mop up' those funds that have not already been subscribed, tend to be available for at least a short period into the new tax year in order to attract funds from those who wish to earn a full year's-worth of interest at those rates.

Your 4.8% account, assuming that you are a basic rate taxpayer, would earn you 3.84% net or around £195.84 interest on £5,100 if the rate did not change over a full year, while the A&L/Santander Flexible ISA would earn £178.50 based on the same assumption.

For less than £20 difference I would, personally, prefer the BoE +3% guarantee of that particular ISA.

Whether the grass will be greener by March 2011, who knows?

lilacbridget

Im of the same opinion this year. If the santander one is still available come april I will be opening that one. The 4.8% I mentioned is net, so i'm thinking i may save in this account till march and then move the balance into the isa in march 2011.

Baldur

lilacbridget wrote: »

Im of the same opinion this year. If the santander one is still available come april I will be opening that one. The 4.8% I mentioned is net, so i'm thinking i may save in this account till march and then move the balance into the isa in march 2011.

Not fully following your thinking here, do you mean that you hope to open the account on April 6th but not fund it until March 2011?

If so, it seems a rather pointless exercise, as you'll only have a few weeks interest from it before the rate drops and you'll probably have to transfer elsewhere to earn a decent rate in any case.

lilacbridget

I suppose im thinking that i can earn about £70 more interest in the year by putting the money in the isa towards the end of the year rather than straight away. Although i understand i'd then be losing the tax free status of about £180. Probably being short-sighted. How much would this £180 give me in 10/20/30 years time inside the isa wrapper?

Baldur

If you are looking to subscribe in March 2011, opening an account in April 2010 is pointless - it cannot be an ISA, as far as HMRC is concerned, as opening an ISA requires two elements 1) a valid application and 2) a valid subscription, so unless you envisage a nominal subscription of £1 sitting in gradiose isolation in the account for the best part of a year, while awaiting the arrival of the £5099 balance of your 2010/11 allowance, you may as well just see what accounts are available in March/early April 2011 in order to utilise your full 2010/11 allowance before the end of the tax year.

lilacbridget

Thanks baldur, its easy to miss out on the bigger picture when trying to make a decision. You've certainly made me think. I suppose I was thinking the santander isa was pretty good with the guarantee and i didnt want to lose the opportunity. Thinking that if something better came along i could always transfer to a new isa. I suppose a decision would be easier if i had a figure in my head what the £180 lost from year one would equate to in the future. Im sure over the timeframe I plan to have the isa the £70 gained initially would be easily surpassed.

To be honest my focus had been on opening a s&s isa this financial year but after doing some research I felt overloaded with information. I knew that I could lose money but was thinking of saving £100 a month and taking a few risks. I figured that saving for 20yrs or so would limit the risk, but when it came to picking funds etc there was just so many.

I think I began to get information overload and went back to overanalysing the cash isa inorder to maximise the interest from that.

Baldur

I'd make the best of the 4.8% interest rate that you can and only subscribe your 2010/11 allowance to whatever is the best available Cash ISA just before the end of the tax year, to ensure that you reap the ongoing tax-free benefits of that allowance in years to come.

Primrose

I think these discussions are probably more relevant to cash ISAs than to equity ISAs. In years when the economy has been dodgy I've split my allowance equally between Cash and Equity but for longer terms benefits, I think equity ISAs produce better financial returns. If I have the funds to fully invest at the beginning of the new tax year, I fully invest then, if only to get the business over and done with, although I know that paying in regular amounts to get the pound averaging effect might be a better way of doing it. However, that would mean every month withdrawing taxable savings, putting it into a current account for a standing order and I can't be bothered with that. However this year, with an imminent General Election I'm really unsure what the result will be and what effect it will have on the financial markets, so I'm going to hold fire and see what happens.