What's the point of ISAs?

Noviceinvestor

I just don't get it! Their interest rates are rubbish. There are options for one's money with better returns - tax or no tax. So why bother? Am I missing something??

withabix

They are 100% safe.

Please list your better returns for annual investments of around £5000 or less, which don't risk you losing your capital.

lisyloo

There are options for one's money with better returns - tax or no tax.

I'm not sure I agree.
Could you list some examples please so we can see what you are referring to.

We need to know what you are talking about in case you are missing something.
For example the regular savers that have the highest rates, generally have very low limits.

Or perhaps we are missing something.
Either way, we need examples.

MoneySaverLog

lisyloo wrote: »

For example the regular savers that have the highest rates, generally have very low limits.

They also limit the amount of time you can pay into them, so restrict how much you can have in a regular saver at the end. You can ofcause open multiple regular savers but at the end of the term you have to find a new home for the money.

So were back to the Cash ISA..

noh

lisyloo wrote: »

I'm not sure I agree.
Could you list some examples please so we can see what you are referring to.

We need to know what you are talking about in case you are missing something.
For example the regular savers that have the highest rates, generally have very low limits.

Or perhaps we are missing something.
Either way, we need examples.

Generally true but an exception is the Monmouthshire BS flexible saver currently paying 4% on a maximum of £1000 a month.
http://www.monbs.com/flexible-saver-issue-2/

JethroUK

withabix wrote: »

They are 100% safe.

Please list your better returns for annual investments of around £5000 or less, which don't risk you losing your capital.

Offset it against a mortgage/borrowings

No tie in - no restrictions - no ceiling (offset £20K if you want) if offset with current account you can spend what you like, have your whole salary paid in and whatever is left is offset against your loan which will always attract more interest than you get with any savings including isa

I've only got an ISA because I have no longer got a mortgage - otherwise I say anyone that has both mortgage and ISA (borrowings & savings) is a fool

noh

JethroUK wrote: »

Offset it against a mortgage/borrowings

No tie in - no restrictions - no ceiling (offset £20K if you want) if offset with current account you can spend what you like, have your whole salary paid in and whatever is left is offset against your loan which will always attract more interest than you get with any savings including isa

I've only got an ISA because I have no longer got a mortgage - otherwise I say anyone that has both mortgage and ISA (borrowings & savings) is a fool

Depends entirely on the comparative rates.
My offset mortgage rate is currently 1.5%.
I have savings and borrowings as that gives me better returns.

ylesia

noh wrote: »

Depends entirely on the comparative rates.
My offset mortgage rate is currently 1.5%.
I have savings and borrowings as that gives me better returns.

Same here, my mortgage rate is currently 2.5%, it's not an offset but I can build up an overpayment reserve and borrow back at anytime so very similar. I can get better than 2.5% in savings so no fool here!

King_Weasel

withabix wrote: »

They are 100% safe.

Try telling that to those who saved with Icelandic banks. They were lucky to retrieve their capital.

ISAs are only wrappers.

Gromitt

JethroUK wrote: »

I've only got an ISA because I have no longer got a mortgage - otherwise I say anyone that has both mortgage and ISA (borrowings & savings) is a fool

Completely disagree. I can easy trump the interest rate the bank is charging for the mortgage using various savings accounts, even when the tax is taken off. If I went with a offset mortgage the interest rate would be higher and I'd be several thousand pounds worse off each year. Once the mortgage interest becomes higher than I can get in savings (minus tax), then I'll pay off the mortgage (could do it now, but I'd actually lose out by doing so).

Gloomendoom

JethroUK wrote: »

I've only got an ISA because I have no longer got a mortgage - otherwise I say anyone that has both mortgage and ISA (borrowings & savings) is a fool

And you are making some pretty stupid assumptions.

I have ISA's and a mortgage. My mortgage rate is 0.69%, my ISAs give me tax efficient savings at around four times that rate.

I'd be a bigger fool to offset that.