What's the point of ISAs?

thenudeone

My offset mortgage savings account only "pays" 1%. I can get at least 3 times that, tax free, in an ISA.

Looks like we've found out who the fool really is in this thread.

JethroUK

thenudeone wrote: »

My offset mortgage savings account only "pays" 1%. I can get at least 3 times that, tax free, in an ISA.

Looks like we've found out who the fool really is in this thread.

So how about you borrow more at the cheap rate and lend it (to another bank) at higher rate and retire on the interest?

jimjames

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.

The OP doesnt say cash or share based so this isn't strictly true. Even cash ISAs as mentioned above may not be 100% protected.

An ISA protects you from tax and even having to report the savings on your tax return. That is worthwhile in itself and all savings inside the ISA remain tax free from both income tax and CGT while they are there so as there is no limit to the amount you can hold overall in ISAs some people have over £1 million in them, all tax free.

innovate

JethroUK wrote: »

So how about you borrow more at the cheap rate and lend it (to another bank) at higher rate and retire on the interest?

The easy way to do what you suggest would be to open a bank. Seems to be working alright for Sir Richard Branson, so as long as you can put your airliners and your carribean island and some other bits and bobs forward as securities, you are on!

You'd need to borrow a heck of a lot in order to be able to retire on it. Just do some sums.

lisyloo

So how about you borrow more at the cheap rate and lend it (to another bank) at higher rate and retire on the interest?

I'm borrowing the max and making about £4K per annum, but still nowhere near enough to retire on - although any extra is of course great.

Still no examples from Novice investor then??

Tight_as_a_Drum

jimjames wrote: »

The OP doesnt say cash or share based so this isn't strictly true. Even cash ISAs as mentioned above may not be 100% protected.

An ISA protects you from tax and even having to report the savings on your tax return. That is worthwhile in itself and all savings inside the ISA remain tax free from both income tax and CGT while they are there so as there is no limit to the amount you can hold overall in ISAs some people have over £1 million in them, all tax free.

How is that even possible??

evenasus

jimjames wrote: »

ISAs some people have over £1 million in them

Tight_as_a_Drum wrote: »

How is that even possible??

I'd like to know this too.

Aegis

evenasus wrote: »

I'd like to know this too.

ISAs, PEPs and TESSAs have been available in various forms since the mid 80s, if memory serves, so that gives nearly 30 years worth of contributions into these various vehicles, which can all be consolidated into a stocks and shares ISA now. With a preference for high risk investments and a bit of luck, I don't see why it wouldn't be possible to see people with over a million in ISAs, though I have yet to encounter someone with this amount.

I believe it would be impossible if only cash ISAs and equivalent were used.

mr_fishbulb

Tight_as_a_Drum wrote: »

How is that even possible??

Motley Fool Have a podcast about it here - http://www.fool.co.uk/money-talk/how-to-become-an-isa-millionaire-11142.aspx

thenudeone

JethroUK wrote: »

So how about you borrow more at the cheap rate and lend it (to another bank) at higher rate and retire on the interest?

I would love to (and there is plenty of equity in my house) but my BS has stated that whilst the current scheme is portable to a new property, and that they'd be happy to extend borrowing on my existing property; only the current balance will remain on the current scheme rate - any additional borrowing would be at SVR:(