Excuse my ignorance, but...

lisyloo

I think the statement is worded wrongly.
The tax benefits are very valuable. For some poeple they may last 50 or 60 years, which compounded is an extremely valuable benefit.
I would definitely say you should take this into account if you need to withdraw.

However clearly there are times you may need to withdraw.
I did it in 2003 where I purchased a home.
I might also do it in an emergency.

So I would say you need to consider the very valuable features before withdrawing, but it's stupid to say don't ever withdraw.
What's the point in having money if you never spend it???

dtsazza

It depends a lot on your own saving situation - in particular, whether you think it's feasible that you'll put away the contribution limit every year.

If you're saving, say, £2-3000 a year then using an ISA for short-medium term savings is fine (and in fact sensible). However, if you're likely to save over £10k a year, then every pound you withdraw from an ISA is a pound that loses its tax-free wrapper forever (which at those levels of saving is always certain going to be hit with 40% tax or more).

Personally I'm using my ISA allowances as a pseudo-pension, trading off some of the tax benefits for flexibility, and maxing out the allowances every year. In this situation, if I withdraw money now it's a big hit to my long-term situation that can never be "caught back up". In that respect the home purchase mentioned above is interesting, since (as with so many people) I'm currently saving towards a deposit on a first house. There will come a period in a few years where I have enough saved for a deposit if I include cash ISAs, but not enough without. Unless there are extremely compelling reasons for purchasing at that very point (e.g. lifestyle, or expected massive price rise in future) I'm inclined to keep saving and leave the ISAs untouched.

(Incidentally, this is also why I'm funding cash ISAs with long-term savings instead of sticking it all in S&S. It's another exchange of lower return for greater flexibility, which I consider acceptable seeing as how I can transfer it into an S&S ISA in a few years once the aforementioned period has passed.)

fimonkey

gadgetmind wrote: »

I've always viewed cash ISAs (and cash deposits in general) as second-stage emergency funds to draw in when the first layer (instant access or close) cash has been exhausted. If you haven't lost your job, or had a similar "black swan" event, then such funds should always remain intact.

Or ISA's can also be a way of saving for something such as a house deposit (which granted, I suppose some people may view buying a house as a black swan event, certainly as stressful sometimes as loosing your job!

FWIW, I have my potential future house deposit in a cash ISA with a limit on withdrawals, my 3 months emergency salary is in a seperate savings account, and the rest I am currently throwing away on the stock market in an attempt to educate myself on investments. There the 'rules' are even more confusing - some say invest for the long term and never tuoch it, buy and hold etc etc. Others say take profits when you've reached a certain percentage gain, and set stop losses to minimise the effects of drops - I seem to be learning the hard way at the moment.