Some advice with cash ISA's

tam2oo5

Im looking to open a cash ISA for the remainder of this year, i have inherited some money and would like to open a cash isa that i have easy access to just incase. Id like to fill it this year then fill it again in April when i can.

Ive spoken to my bank who have told me i have a 0% current account at the minute and that the ISA they can offer me is 0.5%

To me this seemed very bad, the bank is clydesdale. Can you guys recommend anything to me?

Cheers

Lokolo_2

Have a look here for all the best ISA deals of varying length :j

0.5% is indeed very bad so you are right to look around! How much is it you are thinking of depositing in a Cash ISA? There is a maximum subscription limit of £5100 per tax year on Cash ISA's.

You need to decide how long term a deal you'd like to go for, that depends mainly on if you need access to the money, therefore needing an instant access Cash ISA/Notice ISA or your perception on interest rates, you may want to fix for a long period (Up to 5 years) or choose a shorter period (1 year) if you believe interest rates may go up, so that you could transfer your ISA to another provider to get better rates.

Bear in mind that alot of fixed term ISA's only allow an initial deposit or give a limited time to deposit money, so if you'd like to keep adding periodically to an ISA then it may be better to go for an Instant Access ISA so that you can take advantage of the full annual ISA allowance :j

masonic

In addition to the thread above, consider the Lloyds Vantage current account. This pays 4% interest on balances of £5000-£7000 (providing you cycle £1000 through the account every month) and can be used to store any cash you can't put into the ISA straight away. You can have up to 3 accounts.

tam2oo5

Thanks for the advice,

Well the cash ISA i would be interested in would need to be an easy access one. So is there any point in me putting it into a cash isa then because i would only gain a few percent?

Wouldnt i be better using the lloyds vantage account then?

Thanks

masonic

Typically you will get more interest as a taxpayer on cash within the best ISAs. At the moment rates are very low, but that won't be the case forever. You are limited as to how much you can put into an ISA per year, so you need to consider whether or not it is better to shelter some or all of your money sooner so that you don't get stuck with a large proportion of the money in a taxable account when ISA rates bounce back.

Lokolo_2

tam2oo5 wrote: »

Thanks for the advice,

Well the cash ISA i would be interested in would need to be an easy access one. So is there any point in me putting it into a cash isa then because i would only gain a few percent?

Wouldnt i be better using the lloyds vantage account then?

Thanks

That's a personal choice you have to make. What is your annual income? If you pay tax then you may wish to put money into an ISA as it's protected inside a tax-free wrapper, it's a more long term benefit as you will build up tax-free income over the years, not to mention that interest rates might rise at some point, beating the Vantage rate. You have to weigh up the pro's and cons and adapt them to your circumstances to make that decision :j

masonic

aaronmanz wrote: »

What is your annual income?

That's a little too personal a question for one stranger to ask another in a public setting, don't you think?

tam2oo5

Thanks for the reply,

Right i see so when the interest rates go back up the cash ISA will be a better option. Would i be right in saying that i could opt for the vantage account just now and then when the cash ISA interest rates go up i could withdraw my money at any time and load it into my cash ISA?

Thanks for your help

tam2oo5

Its fine i dont mind any questions, the money i inherited. My income is very low im a full time student at uni so i get a bursary and student loan.

masonic

tam2oo5 wrote: »

Right i see so when the interest rates go back up the cash ISA will be a better option. Would i be right in saying that i could opt for the vantage account just now and then when the cash ISA interest rates go up i could withdraw my money at any time and load it into my cash ISA?

Yes, and in your situation it sounds like the right move. Just make sure you think ahead and plan to move the money across to an ISA accordingly

psychic_teabag

tam2oo5 wrote: »

Right i see so when the interest rates go back up the cash ISA will be a better option. Would i be right in saying that i could opt for the vantage account just now and then when the cash ISA interest rates go up i could withdraw my money at any time and load it into my cash ISA?

Not only if interest rates go up, but if tax rates go up, or when Lloyds have got enough current accounts and drop their rates.

The catch is that the ISA allowance is limited and cannot be carried over from year to year. But if the amount of money you are talking about is below (or near) the annual limit (just over £5k), you don't have to worry about it too much since missing out on one year's allowance isn't much of a hardship.

A reasonable tactic is to keep the money whereever it gives the best net return until the end of the financial year, and then at that point decide whether to move some of it to an ISA. An added benefit is that there tends to be a flurry of good offers near the end of the tax year, as providers attempt to entice last-minute savers.