ISA dilemma ?

vigman

My wife is leaving her job at Christmas and retiring (age 59). She has ISAs, including money in the the toxic NW 'magically halving' ISA.

Our dilemma is this: As she will not be paying tax, would it be better to put these ISA sums into higher rate savings account claiming tax free status?

However the dilemma comes as it is possible that within 10 years or so, her father might leave her money (mostly from ongoing commercial rents) that may put her back in to the the tax bracket meaning saving interest would fall again after tax deduction.

If so, is it sensible to move money out of ISAs (currently low interest paying) knowing that her tax free status may change in the future when ISAs may be the best way to earn interest?

TIA

Vigman

lisyloo

What are these ISA's for?
Are they long term retirement savings? or just instant access for a rainy day?

The reason I ask is that cash is a bad investment long term, so if the money is for longer term use she ought to be considering other types of investments.
If on the other hand it's instant access cash for emergencies then instant access and protection from capital loss., theft etc might be more important and it might make sense to sacrifice return for access and safety.

I'm currently not cler on whether this is a large "pension" pot or a small rainy day fund or somewhere in between.

You are correct though that ISAs are tax free for the rest of her life.

Personally I would start by questioning whether she has the correct investment for her goals because as you say, cash is very poor (sub-inflation) and likely to remain that way for the at least 2-3 years.

vigman

Thanks for the reply. My wife ISA funds are a pot of c 40K built up over the last few years, initially because I was going to take (and have taken) ill health retirement aged 60 so we both put money away over the last five years or so.

She is now retiring age 59 and we will drop to an income of around 16k (my work pensions paid in full now due to ill health) and have joint savings in liquid assets (savings, ISAs etc) of c 100k (including her 40K).

Obviously now, the best way to get the highest tax free interest is what we were looking at until my age related pension kicks in in 5 years time (hopefully 7k per annum then) and hers in 7 years time.

The main problem is that IF her father leaves her in a tax paying situation in the future, would it have been unwise to move the funds out of her ISAs into higher rate savings and claim the tax free status?

Although extremely money savvy, I have always done badly with shares and/or unit trusts!

Any thoughts welcomed!?

TIA

innovate

You don't say how much you need to live on, so it is difficult to suggest anything. However, assuming you would not need to touch the £40K in your wife's ISA in the next 5 to 10 years, she could just take out a fixed term or a notice ISA and transfer her ISA. You can get 5-year fixes with 3% AER. Check the first post in this thread:

https://forums.moneysavingexpert.com/discussion/401374

jimjames

vigman wrote: »

Although extremely money savvy, I have always done badly with shares and/or unit trusts!

Any thoughts welcomed!?

TIA

Interested to know what you mean by this? Do you still hold any investments? Did you do badly by selling out at the wrong time?

If you had a balanced portfolio over the last 5 years you could have done very well and even over the last 10/15 years you should be sitting on a good profit.

vigman

Hi

In the past I have had good shares (eg Mersey Docks) that we didn't want to sell but were bought out. I also had shares in Royal Bank of Scotland before they were taken away by the government......!

I remember having (a lot of) unit trusts at 38p which dumped to 3p and never recovered.

In the last 7 years or so I have purchased shares individually through Selftrade and my problem is always not selling at the right time rather than selling early!

I bought Max Petrol at 15p and could have sold at 25p but left them as a long term investment...they now hover around 3p

So my personal shares account is -£490 as I write on investments of around 5k.

My best buy was a company called IS solutions, but it does not wipe out the Max Petrol drop.

Vigman

jimjames

vigman wrote: »

Hi

In the past I have had good shares (eg Mersey Docks) that we didn't want to sell but were bought out. I also had shares in Royal Bank of Scotland before they were taken away by the government......!

I remember having (a lot of) unit trusts at 38p which dumped to 3p and never recovered.

In the last 7 years or so I have purchased shares individually through Selftrade and my problem is always not selling at the right time rather than selling early!

I bought Max Petrol at 15p and could have sold at 25p but left them as a long term investment...they now hover around 3p

So my personal shares account is -£490 as I write on investments of around 5k.

My best buy was a company called IS solutions, but it does not wipe out the Max Petrol drop.

Vigman

I'm not sure what other holdings you've had but from what you've said it doesn't seem like a balanced portfolio. As you've seen holding individual shares can be very risky.

RBS wasn't taken away by the government, it was rescued by them. Without govt the shareholders would have absolutely nothing.

I'm guessing that the UT that dropped to 3p wasn't anything mainstream as a FTSE based UT would not experience that kind of drop. Having a balance is the way to stop things like that affecting the overall portfolio. Having 100% increase if you'd used a FTSE tracker for the last 5 years would make up for peripheral investments dropping.

vigman

jimjames wrote: »

I'm not sure what other holdings you've had but from what you've said it doesn't seem like a balanced portfolio. As you've seen holding individual shares can be very risky.

RBS wasn't taken away by the government, it was rescued by them. Without govt the shareholders would have absolutely nothing.

I'm guessing that the UT that dropped to 3p wasn't anything mainstream as a FTSE based UT would not experience that kind of drop. Having a balance is the way to stop things like that affecting the overall portfolio. Having 100% increase if you'd used a FTSE tracker for the last 5 years would make up for peripheral investments dropping.

Thanks for this information. I'm sure it was in RBS where ALL my shares were wiped out and disappeared from my portfolio, so I do have absolutely nothing. (Sorry to sound vague but I am extremely unwell at the moment!)

I often look at prepared portfolio type of options, but after my UT experience, shy away.

Do you, or any other MSE users, recommend any particular companies to look at, please?

TIA

Vigman

Archi_Bald

I have only a vague idea about your age but given that you should have a 5-10 year horizon for any investments, and be prepared to see your investments tank at times, now might not be the right time to get started. Add to this that you seem uncertain about how investments work, and you might really be better off to stick with savings, at least for the next 6-12 months. In that time, you might be able to read up about investments, and decide whether there is something you would feel comfortable with.

https://forums.moneysavingexpert.com/discussion/4752194

vigman

Archi_Bald wrote: »

I have only a vague idea about your age but given that you should have a 5-10 year horizon for any investments, and be prepared to see your investments tank at times, now might not be the right time to get started. Add to this that you seem uncertain about how investments work, and you might really be better off to stick with savings, at least for the next 6-12 months. In that time, you might be able to read up about investments, and decide whether there is something you would feel comfortable with.

https://forums.moneysavingexpert.com/discussion/4752194

Thanks for the reply. Age is 60 with a 5 year investment plan in mind. I did do extremely well buying gold (eg Krugers at £350) but have usually been happy with the old ISAs and savings accounts when they were 5-6% interest.

Now we are in the 1-2% interest bracket I would be interested in researching other avenues.

Not TOO unsavvy about investing as our 40K Victorian seaside flat bought in 2001 (cash) is now worth 185-190K!

Going back to my OP, not sure whether it would only be a short term gain getting my wife's ISA monies into tax exempt savings when she retires soon and is under the earnings/tax threshold?

TIA

Vigman

kidmugsy

If ISAs survive, you and your wife could return £40k to ISA shelters in just two years. So it doesn't seem mad to withdraw part of £40k if you want a higher interest rate. You could even argue that you should take advantage of the apparent lunacy of high-yielding current accounts while they still exist.

"And that too shall pass away."