I don't see the point in ISA

GA7_2

Considering that from July of this year you can invest up to 15k a year in an ISA, what value does an ISA hold when you look at the 123 santander account paying 3%? I'm referring to the short term/regular ISA's btw, not the ones you invest for 3-5 years.

If you can invest 15k in an ISA, then in 2 years you can invest what would normally take you about 6 or so years. So even if ISA rates were down and went up again, yu could always just transfer 15k from your santanders 123 account to an ISA and grow from there again.

I'm struggling to see the value in the ISA and atm can only see the 123 account as by miles the best option.

Archi_Bald

If your total savings in each of the next 5 or so years stay below the annual ISA limit, then yes, cash ISAs are not exactly the smartest choice at present.

GA7_2

Archi_Bald wrote: »

If your total savings in each of the next 5 or so years stay below the annual ISA limit, then yes, cash ISAs are not exactly the smartest choice at present.

Let's say you have 30k in savings. You bang that into a 123 at 3%. A year later the ISA is 3.5% and you bang 15k into the isa leaving 15k in the 123. The second year you bang the other 15k in. So for 1 year you get 15k at 3.5% and 15k at 3%.

Hardly losing out.

Archi_Bald

Yes you would be losing out.

Because you do not get a penny's worth of interest in a 123 on anything above £20K. Unless you have more than 1 123, but that's no longer an option for new applicants now.

Even if you had more than 1 123, you would still be losing out since you can get a lot better than the 3% for at least £9K out of your £30K.

NB. If you think I am pro-cash ISA at all costs, you need to read over my previous posts.

jimjames

You're right. A cash ISA is totally pointless for most people at the moment and it incredibly frustrating to see them promoted endlessly with no suggestion there is any better option.

An article on The guardian shows16 million savers have only a cash Isa, with an average value of £7,620

http://www.theguardian.com/money/2014/apr/27/cash-isa-rates-slashed-santander

That is way below the new ISA limit so they could easily use best non ISA and move into ISA whenever rates improve.

Outside an ISA you can get 5% on those sorts of amounts.

We are probably exceptional on this board with people who are more financially savvy than the population as a whole and with higher balances of cash and investments which boost those averages. 66% of the population have no savings or under £1000 which makes a big difference to those numbers.

dzug1

There is a certain psychological barrier to cashing in an ISA though - at lest with some savers.


So with an ISA you still have the capital and some interest. With a normal savings account you've spent the lot


OK - not that convincing an argument......


And there are such things as stocks and shares ISAs

Freecall

Given that the real benefit of an ISA lies in the long term accumulation of funds in a tax-protected environment, I would suggest that at present they are best suited to long term investments. That means an S&S ISA.

Up until now the barrier was that moving funds across was a one way street but now that has gone I can see no reason to keep funds in cash within an ISA.

When we get back to the kinds of interest rates we saw a few years back (happy days! ) then a partial move back into cash might be appropriate.

BillJones

GA7 wrote: »

Considering that from July of this year you can invest up to 15k a year in an ISA, what value does an ISA hold when you look at the 123 santander account paying 3%?

You can put £15k in every year into the ISA, and all gains on it will remain tax free.

If you keep doing this for decades then you will have a pretty serious sum saved, and all gains on it will remain 100% yours (unless the govt. changes the rules...)

As with a great many savings and investments strategies, you need to look over the long-term to realise the full benefit.

innovate

As Freecall said, if you do this for decades, then S&S ISAs are the way to go. In literally all cash ISAs you are losing money with rates as they stand since they are barely meeting inflation rates.

Kantankrus_Mare

So......I am not great with figures.......I have some savings (approx. 4000) in a natwest isa which I found out today is now only paying a measly 1%.

Was going to move it to a reg saver isa at nationwide that gives 2.5%.

Would I be better off putting it elsewhere considering I need instant access to my money and they arent going to be left for years to mount up?

jimjames

Kantankrus_Mare wrote: »

So......I am not great with figures.......I have some savings (approx. 4000)
Would I be better off putting it elsewhere considering I need instant access to my money and they arent going to be left for years to mount up?

In a word, yes!

Check out the boards here for best options paying 5%