Mini Insurance ISA...what to do with it?

Mamasavingnovice

Please help...as a complete novice to forum i'd really appreciate any help!

I've had the above mini insurance ISA for over 10 years and have just let a £20 direct debit run every month. It's now worth about £3000...not sure how great this is a return for this type of product but over 10 years i reckon i've invested about £2500. My question is...do i just let this one run and spend it when i need to get my hands on it or is there a better way i can invest £3000. I don't want to spend it yet and am happy for it to sit somewhere but I'd probably like to access it without fuss if i need to...you never know what's round the corner!

What do you reckon?..and thanks!

Jake'sGran

What is an insurance ISA? I have not heard of that before. The only cash ISAs I am familiar with are held at banks or building societies. This year (before April 5th or so) you can invest £5100 in a cash ISA and then start again in the new tax year if you wish. You can find ISAs paying the best interest rates by looking at some comparison tables or on this page, at the top where it says "banking saving".

You can transfer this ISA to a better paying one (if it is not paying good interest) and you need to find one with easy access. If you do decide to move it you need to contact the new provider i.e. do not move it out yourself.

psychic_teabag

In the old days of mini and maxi ISA's. money could be put into an insurance ISA.
http://www.investments.co.uk/isa-peps/maxi_isa.html
http://www.keegan-pennykid.com/financial_services/investments_savings/ISAs.html

But the rules changed at some point to simplify life. You should probably check whether it became a cash ISA or a S&S ISA. (Or it might have degraded into an ordinary savings account if you didn't complete some necessary paperwork at the time.)

How best to proceed probably depends on this detail.

Mamasavingnovice

oooh...thanks for your reply.

I have just checked and it's a stocks and shares ISA now so i guess I must have done some paperwork. Do you have any tips please?

Thanks again

LongTermLurker

Transfer to Hargreaves Lansdown (for example) and choose a diverse range of funds spread across, e.g., UK, Europe, Emerging Markets & Bonds, depending on your age, attitude to risk, need for income, etc. Have a read round various threads on here and you'll get the idea.

To answer your earlier question, £500 profit on £2500 would be 20% - not a great return after 10 years.

Loughton_Monkey

Actually, you have been getting an equivalent growth rate of a few coppers short of 4% a year.

Agree suggestion to open an ISA with appropriate 'fund supermarket' such as HL, throw the money into a couple of funds [do some research] and consider a more substantial Direct Debit into it for the future.

In theory, you should 'transfer' the funds, but at this sort of low level, you are unlikely to be breaching ISA monetary limits so you could 'cash it in' and put the cash into the new arrangement (probably quicker than a formal transfer).

psychic_teabag

Loughton_Monkey wrote: »

In theory, you should 'transfer' the funds, but at this sort of low level, you are unlikely to be breaching ISA monetary limits so you could 'cash it in' and put the cash into the new arrangement (probably quicker than a formal transfer).

But hasn't OP already funded a S&S ISA this year, so that while it wouldn't breach the monetary limits, it still breaks the rule about only funding one ISA per year. Or are you proposing to go by the self-transfer "rule" ?

LongTermLurker

psychic_teabag wrote: »

But hasn't OP already funded a S&S ISA this year, so that while it wouldn't breach the monetary limits, it still breaks the rule about only funding one ISA per year. Or are you proposing to go by the self-transfer "rule" ?

It's hard to say - we can only assume from the post that this was funded many years ago - paying into an insurance ISA hasn't been possible for years. However, OP says they've paid £20/month, which would be £2400 over 10 years, so you may be right.

Although OP later says they must have filled out some forms to transfer it, I wouldn't be surprised if it was just converted to a S&S ISA after the demise of Insurance ISAs, and they've lost the letter telling them so.

It all depends whether they intend to invest/save the balance of their 2011 ISA, because even if they have subscribed this year, it's not long to 2011/12 - then again, if waiting that long, they might as well transfer

I'd transfer, because you don't know if you'll end up being able to invest more and not being allowed to.

Loughton_Monkey

psychic_teabag wrote: »

But hasn't OP already funded a S&S ISA this year, so that while it wouldn't breach the monetary limits, it still breaks the rule about only funding one ISA per year. Or are you proposing to go by the self-transfer "rule" ?

You're right. But in my mind I was assuming OP would be doing this next tax year, because it will probably take a while to get the funds out.

Mamasavingnovice

Now i'm more confused..told you i was a novice! Yes, I have lost the letter as it was ages ago..years i think. Anyway, I think you're telling me that the best route would be to shop around and transfer the balance rather than sit on it and save somewhere? ie invest rather than save the £3000...thanks for your responses

LongTermLurker

Mamasavingnovice wrote: »

Now i'm more confused..told you i was a novice! Yes, I have lost the letter as it was ages ago..years i think. Anyway, I think you're telling me that the best route would be to shop around and transfer the balance rather than sit on it and save somewhere? ie invest rather than save the £3000...thanks for your responses

Sorry, I guess the first thing before deciding whether to save or invest it is to determine your requirements - providing you don't lock it away in a term-deposit savings account, you would have pretty much immediate access to it whether you left it where it is, saved it in a cash account or invested it in an alternative S&S ISA. The difference is that if you leave it where it is, or transfer to another S&S ISA, it could actually be worth less if you need to cash in quickly. How likely it is to lose money depends entirely on the funds you choose to invest it in - some are stable and some very volatile, but any and all of them could drop on any particular day, and if you need it that day (week/month) you'd lose out.

If you put it in a cash account, you wouldn't risk the £3000, but you would risk making very small gains and may risk your savings not keeping up with inflation (your money can buy you a ton of bread today, but add future interest on and it may only buy you 0.9 ton in 5 years time because the price of wheat rocketed - ideally you'd hope to be able to buy 1.5 tons in the future.)

Looking at things more generally, your money is best split up as follows:

1. Some money that you can get your hands on quickly, and that has virtually no risk of loss - that's your emergency fund
2. Some money that you can't access immediately, earns more interest than #1, but also has no risk of loss - that's your hedge against investment loss at some critical point in the future, and it adds guaranteed stability to your wealth
3. Some money that you invest, in the hope that you can ride out the troughs and make more gains than if you'd put it all in cash

How you split it up depends on you.

Finally, the big question everyone is asking above, is "have you paid any money into this account, or any other ISA product, since 6 April 2010?"