"Temporary" S&S ISA for 13/14 and 14/15 50% allowance

bob_100

jimjames wrote: »

But surely if the limit is now £15k compared to £5k that it was before then it makes even more sense to maximise your return now rather than some potential return at some future date as you can get an extra £10k (£20k as a couple) into cash ISAs each year.

You have no way of knowing when interest rates may increase and actually be better inside an ISA - it could be 5 or 10 years away, we just don't know. That to me seems a big risk to take and you seem to be focused on the tax break not the best return even long term especially when it is only £5k that is easily absorbed via the proper route in future.

But i can invest more than the 15k this way. I can invest 20k into an ISA

Even if interest rates remain at the all time low as it is now. I will get an additional £92 a year. However given the election is in 18 month i expect rates to increase from then. However Long term this is the best option, rather than finding alternative ways to maximise my interest in the next 4 months. Also the 5% AER is only up to £2500 per account and after tax is 4%.

bob_100

jimjames wrote: »

As a Moneysaving site I find it incredible that you're prepared to pay out £50 and lose interest purely to get a tax wrapper than pays less interest than outside when we have no idea when rates will rise again.

5% is available with Nationwide & TSB. Personally I'd prefer to pay tax on 5% than get 1.6% tax free, George Osborne must love me:)

4 months interest which is about £30 based on the current 1.6% easy access which you will be missing out on. Hardly life changing.

jimjames

bob_100 wrote: »

4 months interest which is about £30 based on the current 1.6% easy access which you will be missing out on. Hardly life changing.

That's fine if you can justify it to yourself in those terms.

Personally I would be comparing to the current best paying account and the ISA deficit compared to that account for the whole £5760 over a number of years.

So 4 months not getting interest at 5% is £96, in itself quite a big difference to your £30.

Then every year you remain in the cash ISA at 1.6% rather than 5% outside will be a loss of 3.4% pa. By my calcs that is £196 pa.

So after 18 months you'd be nearly £300 worse off inside the ISA and then £196 per year going forward assuming rates are still not higher.

Hopefully you can see why I think it is such a bad idea. If you don't need £300 income that's entirely your choice but as a Money saving site I think it's important to point out and some savers may find it useful to know that better rates are available. If maximising income isn't important then savers probably shouldn't be complaining so loudly about low rates.

bob_100

jimjames wrote: »

That's fine if you can justify it to yourself in those terms.

Personally I would be comparing to the current best paying account and the ISA deficit compared to that account for the whole £5760 over a number of years.

So 4 months not getting interest at 5% is £96, in itself quite a big difference to your £30.

Then every year you remain in the cash ISA at 1.6% rather than 5% outside will be a loss of 3.4% pa. By my calcs that is £196 pa.

So after 18 months you'd be nearly £300 worse off inside the ISA and then £196 per year going forward assuming rates are still not higher.

Hopefully you can see why I think it is such a bad idea. If you don't need £300 income that's entirely your choice but as a Money saving site I think it's important to point out and some savers may find it useful to know that better rates are available. If maximising income isn't important then savers probably shouldn't be complaining so loudly about low rates.

Do you have a link to these accounts, as i believe they are limited to £2500 and also the 5% is AER meaning after tax is really 4%, so your calcs are wrong and also you would need to open 3 of these accounts and meet the terms and conditions, which i presume include depositing a certain amount and having 2 direct debits going out etc.

And this is my own personal circumstances I am not recommending this. Again I am thinking long term not 12 months / 18 months down the road. I'm thinking min 5 years when i expect ISA rates to be much more healthy and beating savings accounts.

bowlhead99

jimjames wrote: »

Hopefully you can see why I think it is such a bad idea. If you don't need £300 income that's entirely your choice but as a Money saving site I think it's important to point out and some savers may find it useful to know that better rates are available. If maximising income isn't important then savers probably shouldn't be complaining so loudly about low rates.

I can understand that perspective. Clearly if you can get 5% right now for a year by jumping through some hoops to create new current accounts and use the promotional rates, then hop onto other promotional rates once they expire, you'll create a good headstart on your unwrapped funds.

Some heavy savers would already have maxed out those best deals, of course. And ultimately the type of deals which are now prevalent in a generally low interest rate environment (i.e. nobody is offering high savings rates so we won't try to compete on savings rates but please move your main account to us and we'll throw in a limited sweetener on the rate and some promotional features), are not necessarily here to stay - they are a product of todays curious times.

If you make an optimistic couple of hundred pounds extra a year on the net returns from unwrapped promotional rates for the next two or three years, your £5800 ISA might be running £500 behind. If by that point the prevailing gross rates are broadly similar between ISA and unwrapped, at say 4%, a high rate taxpayer would take about 5 years to catch back up. And by year 10, would be clawing further and further ahead with a higher compounding net return each year.

As we can't see the future it is probably safer to assume that today's conditions continue and not throw away S&S ISA costs or miss out on the best interest rate now available. A bird in the hand, and all that. However, the bird-in-the-hand argument to miss out on a tax wrapper for the rest of your life because today the ISA rate is 1.75% net and the promo current account rate is 3% less 40% tax giving 1.8% net, will, to some, seem shortsighted.

A few months' missed interest or out of pocket costs can be caught up in 'normal market conditions'. The challenge is to judge what the 'new normal' will settle at. IMHO, we will see a reversal of the prevalence of these promo current accounts - and potentially at some point with increasing regulatory costs for operators of bank accounts, we'll see an end to free current accounts and end up following what the rest of the world does, where subscription-limited savings accounts (such as ISAs) are the ones that banks can afford to pay best rates on.

Certainly though, with this nice jump to the annual subscription limit, there will be a lot of people who now can't max their annual subs limits on an ongoing basis and the argument that "if you don't use it you lose it" will carry much less weight for them.

To tie in with the other thread we were on jimjames, my thoughts and a bit of maths are linked here in case any readers of this one are at all interested. :rotfl:

bob_100

bowlhead99 wrote: »

I can understand that perspective. Clearly if you can get 5% right now for a year by jumping through some hoops to create new current accounts and use the promotional rates, then hop onto other promotional rates once they expire, you'll create a good headstart on your unwrapped funds.

Some heavy savers would already have maxed out those best deals, of course. And ultimately the type of deals which are now prevalent in a generally low interest rate environment (i.e. nobody is offering high savings rates so we won't try to compete on savings rates but please move your main account to us and we'll throw in a limited sweetener on the rate and some promotional features), are not necessarily here to stay - they are a product of todays curious times.

If you make an optimistic couple of hundred pounds extra a year on the net returns from unwrapped promotional rates for the next two or three years, your £5800 ISA might be running £500 behind. If by that point the prevailing gross rates are broadly similar between ISA and unwrapped, at say 4%, a high rate taxpayer would take about 5 years to catch back up. And by year 10, would be clawing further and further ahead with a higher compounding net return each year.

As we can't see the future it is probably safer to assume that today's conditions continue and not throw away S&S ISA costs or miss out on the best interest rate now available. A bird in the hand, and all that. However, the bird-in-the-hand argument to miss out on a tax wrapper for the rest of your life because today the ISA rate is 1.75% net and the promo current account rate is 3% less 40% tax giving 1.8% net, will, to some, seem shortsighted.

A few months' missed interest or out of pocket costs can be caught up in 'normal market conditions'. The challenge is to judge what the 'new normal' will settle at. IMHO, we will see a reversal of the prevalence of these promo current accounts - and potentially at some point with increasing regulatory costs for operators of bank accounts, we'll see an end to free current accounts and end up following what the rest of the world does, where subscription-limited savings accounts (such as ISAs) are the ones that banks can afford to pay best rates on.

Certainly though, with this nice jump to the annual subscription limit, there will be a lot of people who now can't max their annual subs limits on an ongoing basis and the argument that "if you don't use it you lose it" will carry much less weight for them.

To tie in with the other thread we were on jimjames, my thoughts and a bit of maths are linked in case any readers of this one are at all interested. :rotfl:

Very useful info in this post and the linked one. Do you have any idea which would be the best place to park my cash for 4 months, whilst paying the lowest costs. The best i could see is cavendish online which state

Cavendish Online FundSupermarket

Cavendish Online has created a fund supermarket that provides the cheapest route to buy a stocks & shares ISA.
All new investments to the Cavendish Online FundSupermarket (powered by FundsNetwork™) will have two explicit charges applied:
- A fund manager charge (sometimes called the AMC). This charge will vary according to the fund you wish to buy. As a guide fund charges vary between 0.64% and 0.85% with most at 0.75%. Tracker funds start from 0.10%. Please to identify a specific fund charge.
- A platform charge of 0.25% (of which Cavendish Online will receive 0.05% from FundsNetwork).

The Cavendish Online FundSupermarket will not levy any other charges. Customers will also benefit from:

• NO initial charges on all 2,000 funds
• NO annual fees
• NO exit fees
• NO switching fees
• NO Cavendish Online fee

Thanks for any help

jimjames

bowlhead99 wrote: »

I can understand that perspective. Clearly if you can get 5% right now for a year by jumping through some hoops to create new current accounts and use the promotional rates, then hop onto other promotional rates once they expire, you'll create a good headstart on your unwrapped funds.


Certainly though, with this nice jump to the annual subscription limit, there will be a lot of people who now can't max their annual subs limits on an ongoing basis and the argument that "if you don't use it you lose it" will carry much less weight for them.

To tie in with the other thread we were on jimjames, my thoughts and a bit of maths are linked here in case any readers of this one are at all interested. :rotfl:

Thanks Bowlhead.

Personally I'd expect that these rates could last for at least another 3 years. That would mean there is still the opportunity to get £45k into cash ISAs or £90k as a couple, if it is 5 years then that increases to £75k/£150k. Jumping through hoops with no interest/poor rates now in order to protect later still doesn't seem to make sense to me when there is such a huge limit now available further down the line that can for most people is unlikely to be exceeded.

bowlhead99

bob_100 wrote: »

Very useful info in this post and the linked one. Do you have any idea which would be the best place to park my cash for 4 months, whilst paying the lowest costs.

An option would be TD Direct, which has a high closure fee but also has cashback for new ISAs opened by 5 April and kept for 6 months plus. You could stick your £5,760 in it, do a small random buy and sell within the space of a couple of minutes of each other to meet their 'fair use policy' (which only requires one or more trades within the 6 months), get the cashback cheque 6 months later and transfer out.

The transfer out would cost you a closure fee but even if they charge you £50+VAT closure fee and £30+VAT admin fee in the year of closure, and the share trades cost you £12.50 a pop (plus a few pence of stamp duty), in total your costs are pretty much a wash with the £100 cashback - you're out maybe £20 ish. If the trades were for to buy and sell funds rather than shares, there are no trading costs, but then it is kinda difficult to argue 'fair use' if they have not made a single penny out of you.

I only mention TD rather than Cavendish because I use them myself and they have a decent service - I have no experience with Cavendish and no idea their attitude to long term uninvested cash.

If you changed your mind and actually wanted to keep the ISA you could do worse than TD. They are a full service broker rather than just a fund supermarket so although the fund platform fees are higher than Cavendish (0.35% rather than 0.25%) you can buy UK and international shares together with a full range of listed investment trusts (rather than just a few Fidelity ones available at Cavendish), investment companies, ETFs and individual corporate bonds.

Another decent S&S ISA provider is the execution-only broker http://www.x-o.co.uk/ ; they are the exact opposite of Cavendish in that they only let you hold shares and not funds. Cheap and cheerful.

If you use the right "temporary" S&S ISA provider you may be looking at £0-£50 of fees over the period to this summer, but as others have mentioned the bigger picture is perhaps the opportunity cost of your cash not being deployed in anything that generates an income for several months, which seems like a waste, and the fact that the cash ISA rates available in July will probably still lag behind the best promotional non-ISA rates for some time.

Have fun. :beer:

Perelandra

bob_100 wrote: »

Very useful info in this post and the linked one. Do you have any idea which would be the best place to park my cash for 4 months, whilst paying the lowest costs. The best i could see is cavendish online which state

Cavendish Online FundSupermarket

Cavendish Online has created a fund supermarket that provides the cheapest route to buy a stocks & shares ISA.
All new investments to the Cavendish Online FundSupermarket (powered by FundsNetwork™) will have two explicit charges applied:
- A fund manager charge (sometimes called the AMC). This charge will vary according to the fund you wish to buy. As a guide fund charges vary between 0.64% and 0.85% with most at 0.75%. Tracker funds start from 0.10%. Please to identify a specific fund charge.
- A platform charge of 0.25% (of which Cavendish Online will receive 0.05% from FundsNetwork).

The Cavendish Online FundSupermarket will not levy any other charges. Customers will also benefit from:

• NO initial charges on all 2,000 funds
• NO annual fees
• NO exit fees
• NO switching fees
• NO Cavendish Online fee

Thanks for any help

As I was reading this thread, I was actually thinking that the Fidelity MoneyBuilder Cash fund via Cavendish would probably be a decent way to achieve these aims-

Very low downside risk (I believe), as the fund is very, very cautious.

No fees (as you state above)

Money is considered "invested", so doesn't have any form of time limited, like the ISA Cash Park would have.

intalex

Anyone got this or know of it?
http://www1.firstdirect.com/1/2/sharedealing/self-select-isa