Where to put money: ING Direct at 5% or ISA?

Inf0war

Hi,

Am a student who is looking to put his money in the most profitable savings scheme and also a flexible scheme so that the money can be taken out or added without any penalties.

Ing direct pays me 5% gross. Is that shielded from tax and inflation?

Will putting money in ISA shield it from inflation or tax?

Regards

derrick

ING interest will have tax taken off it unless you are eligable for payment without paying tax,i.e below the tax threshold.
There are a lot of I S A`s paying more than 5%,and if it is a cash ISA then the interest is not taxed, £3000 limit in each tax year.
Shield against inflation? not sure unless you have a crystal ball

grumbler

Usually students do not pay tax. In this case the only reason to open ISA is using your £3000 yearly allowance for long-term savings, at least untill a few years after you become a taxpayer. For short-term savings there are higher rates, for example, 5.5% Egg (for 6 months), Halifax regular savings account 7% for 12 months (up to £250 per month).
If you are not a taxpayer do not forget to inform bank about this and fill in some form.
P.S. A&L online saver also pays 5.35% - more than ING.

crana999

grumbler wrote:

Usually students do not pay tax. In this case the only reason to open ISA is using your £3000 yearly allowance for long-term savings, at least untill a few years after you become a taxpayer.

except in some cases where you can get more interest on an ISA than you can gross on another savings account.

Walletwatch

crana999 wrote:

except in some cases where you can get more interest on an ISA than you can gross on another savings account.

I think generally, you need to factor in the long-term benefit of the money you trap into an ISA - that too at an early stage - it would stand one in good stead in the long-term, well, at least till 2010. Even talking of just these six years, the impact of tax-free interest on this corpus would be far-reaching. Plus, I really don't see this wrapper not being available, come 2010. Thanks to politics and the politicians, and their need to have to do something for the average investor and the economy, they will either extend this, or give this avenue in some other form.

crana999

Yes, definitely.

What I meant was that even if your savings aren't going to be that long-term it can sometimes still make sense to use an ISA for better rates.

simonkirkland

I'm still trying to work out how a student can be saving money!!! lol

I worked all the time I was a uni and still had to take the full student loan as well, just to be able to live, pay rent and tuition fees...!

fair play if you can save money whilst your a student...

Simon

crana999

i saved all my wages from working since age 12 plus other money and i only started uni last year so i still have some savings left.

cheerfulcat

Inf0war wrote:

Hi,

Am a student who is looking to put his money in the most profitable savings scheme and also a flexible scheme so that the money can be taken out or added without any penalties.

Ing direct pays me 5% gross. Is that shielded from tax and inflation?

Will putting money in ISA shield it from inflation or tax?

Regards

Interest on money in an ordinary bank account is liable to tax, and is normally taxed at source.You can ask for it to be paid gross ( ask the bank for a form R85 ) if your income is less than your personal allowance, and if the interest will not take you over the allowance. Details of allowances here -

http://www.inlandrevenue.gov.uk/rates/it.htm

Cash savings are very vulnerable to inflation. Particularly at a time when inflation is deliberately understated. If you want inflation proofing, you should perhaps consider either index-linked gilts ( or NS&I's index-linked bonds ), or stock market investments. The first two are less risky than the third, but the stock market over the long term is more rewarding.

HTH

Cheerfulcat