Are cash ISAs worth it for 2014/2015 tax year?

FatherAbraham

jabbahut40 wrote: »

In recognition that cash ISA interest rates remain pitifully low and unlikely to raise significantly in the next tax year are people still bothering with saving in cash ISAs? Rather than split 50/50 with a cash ISA and S&S ISA next tax year I was thinking on going all S&S ISA to see whether I can achieve better growth in my money. I already have five years of cash ISAs saved so have sufficient 'rainy day' savings.
Any thoughts on the above ...?

Well, it all depends on what the money is for.

One needs to look at one's future consumption profile, then pick an asset allocation which matches that. This comes way before issues of return.

If one needs cash to meet short-to-mid-term liabilities, then one needs cash -- even if it costs money to hold cash.

If one has no need for any more cash, because foreseeable liabilities are catered for, then it doesn't much matter how high (within reason) the real rate of return on cash deposits is -- this is probably the wrong place to put further assets, which need long-term growth.

Don't let something as inconseqeuntial as rate of return mess your asset allocation up.

Warmest regards,
FA

2010

If you`ve reached retirement age and have a load of cash for your "old age" the last thing you should be doing is "gambling it" on S&S (isa`s or not).
Cash is cash no matter what the interest rate.
Time is not on your side.

planteria

jabbahut40 wrote: »

Hi,

In recognition that cash ISA interest rates remain pitifully low and unlikely to raise significantly in the next tax year are people still bothering with saving in cash ISAs? Rather than split 50/50 with a cash ISA and S&S ISA next tax year I was thinking on going all S&S ISA to see whether I can achieve better growth in my money. I already have five years of cash ISAs saved so have sufficient 'rainy day' savings.
Any thoughts on the above and what are you doing?

Thanks,

Jabba

in short, if you can leave the money alone for a good few years, i would use your whole allowance for S&S.

jabbahut40

planteria wrote: »

in short, if you can leave the money alone for a good few years, i would use your whole allowance for S&S.

Thanks for all the comments. I am early 40s with no debts or mortgage. My thinking is that I will go full S&S ISA for next tax year. My wife and I both have 5 years cash ISAs however I will probably keep this as cash for short term emergency funds.

Jabba

jimjames

2010 wrote: »

If you`ve reached retirement age and have a load of cash for your "old age" the last thing you should be doing is "gambling it" on S&S (isa`s or not).
Cash is cash no matter what the interest rate.
Time is not on your side.

It doesn't help understanding to compare S&S to gambling when it is not. With a S&S ISA you are buying into part ownership of companies and a share of their success and ultimately profits. Gambling involves the extremely high risk of losing your entire stake - with the right selection of funds that is almost impossible in an S&S ISA.

I'm also not sure about an aversion to S&S in old age. Surely the important thing is a stable and growing income; in most circumstances the capital value doesn't matter as much as long as the income is maintained, in which case S&S for a part of a portfolio would be appropriate.

Time might not be on your side but if the investments drop and you die before they come back again then you won't really care too much about it. You wouldn't put all your money in S&S as you would need some cash but there does seem to be a tendency to hold much "loads of cash" or larger amounts of cash than I'd think necessary if you want to maximise your income for what could be decades of retirement. Having a mix of different elements as part of a portfolio would seem to be a more sensible balance.

Nick_C

2010 wrote: »

If you`ve reached retirement age and have a load of cash for your "old age" the last thing you should be doing is "gambling it" on S&S (isa`s or not).
Cash is cash no matter what the interest rate.
Time is not on your side.

Sorry, I completely disagree. Although I suppose it might depend on what you mean by retirement age. I am retired. I am 56. I have a significant amount of money invested in shares. That investment is delivering an income in real terms, and my capital is also growing. I probably have a life expectancy of about 30 years. If I put my money into savings accounts, it would certainly lose value in real terms each year, and would not give me an income!

2010

If and when markets turn a S&S isa won`t save you, it`ll go the same way as the rest --- down.(same with trackers)
All those who want to risk their capital, it`s their choice.
Everything`s rosy in a bull run but when the bears escape it`s a different thing.
The posters on here keep saying how well their funds are doing but don`t actually name them, so I`m assuming ALL funds must be giving at least 5% income year on year.

Herbalus

2010 wrote: »

All those who want to risk their capital, it`s their choice.

Well, yes. But compare that to losing money in real terms because cash ISAs are lower than inflation....

Also, your name is 2010 but your picture is 2014. Just saying!

jimjames

2010 wrote: »

If and when markets turn a S&S isa won`t save you, it`ll go the same way as the rest --- down.(same with trackers)
All those who want to risk their capital, it`s their choice.
Everything`s rosy in a bull run but when the bears escape it`s a different thing.
The posters on here keep saying how well their funds are doing but don`t actually name them, so I`m assuming ALL funds must be giving at least 5% income year on year.

Down is good, it means you get more for your money if you're a buyer. Not sure why shares seems to be the only market where people fear low prices - in the shops everyone loves a bargain.

The FTSE is returning 3.5%pa income, that is regardless of what the capital value does going down or up. Last year it rose 15% as well as that income. Of course that value will fluctate but avoiding investing because the price may go down is like avoiding driving your car because you could have an accident. The markets will turn at some point, like they did in 2007/8 and again in 2009 to come back up. The current FTSE100 value is now above what it was in 2007 despite the slump from the credit crunch and the FTSE250 is much higher.

I do struggle to understand the benefits of massive amounts in a cash ISA.

If you are young and saving for a house deposit then the tax wrapper isn't really very important as you will be accessing the money to buy the house - the return is far more important to you than it being tax free in 10 years time.

If you are older and saving for retirement then cash isn't the best place to do that long term so holding large amounts in cash ISAs wouldn't generally be needed.

If you are retired and using savings/investments to supplement pension income then the income is of primary importance so the best place is the one giving highest interest which isn't a cash ISA at the moment.

2010

Herbalus wrote: »

Well, yes. But compare that to losing money in real terms because cash ISAs are lower than inflation....

Also, your name is 2010 but your picture is 2014. Just saying!

For a 23 year old you seem to have a good financial and observant head on your shoulders.
Maybe you could figure it out why my username is 2010 but I have a 2014 avatar.


Back to inflation and money losing value.
If you are successful at investing and have a bit of luck as well and if you live to draw your pension you will find that losing a bit of value through PERSONAL inflation is no big deal.
A few years back mortgages were 15% and you could get 10% anywhere for your cash.
A lot of money was made in the run up to 2000 the so called dotcom bubble.
Happy days.