I don't see the point in ISA

Archi_Bald

Alter_ego wrote: »

OK folks, How about a suggestion for my situation. I am 72 yrs, so long term is not really for me. I have a Coventry reward instant access ISA the balance is around 35k. Interest 2.5%. I don't want the hassle of moving money around regularly for marginal gains in interest,
I already have a Nationwide interest bearing current account which I maintain at just above their high interest level.
Any ideas?

Move it into a 90 day notice ISA at DCU, 3% AER variable?

https://forums.moneysavingexpert.com/discussion/4938603

TattyBear

The UK almost certainly won't see 8% interest rates again in the next 30-40 years. I'd be very happy if it happened, but it's not going to.

Alter_ego

Archi_Bald wrote: »

Move it into a 90 day notice ISA at DCU, 3% AER variable?

https://forums.moneysavingexpert.com/discussion/4938603

Thanks Archi, had a quick read, there seem to be a few unanswered Qs. Do you know if the loss of 90 days interest is on the amount withdrawn (instant) or on the whole balance?

AE

Archi_Bald

Afraid I don't but they are quick to respond to emails.

silverwhistle

I'll add my experience, and you can take from it what you will..

I had pretty much the average amount in a cash ISA if jimjames's (above) figures are correct. I moved abroad a bit for work and hence couldn't move my funds and ended up with 0.5% (IIRC).

It was with great pleasure that when I moved back to the UK I spent much of the cash ISA on PV solar panels. The savings on electricity plus the money for what I exported in the first few months alone far, far outweighed the less than inflation return on the ISA. (Those of you who understand the system will note I'm excluding the FIT payments :-) ). I've still got a grand plus, and I think that's going towards a wood-burning stove: you can see my views on future fuel costs and supply!

To be honest I reckon cash ISA's are pointless unless they eventually get moved to S&S, even a cheap low-fee index tracker.

jimjames

darkvader wrote: »

Keeping a short term view plus the low interest over the past few years, everyone wonders why saving in ISAs make a difference.

But things change over time and as markets are cyclic in nature, interest rates will go north in 5 or 10 years. As the whole idea of saving is for short term AS WELL AS long term then you must think twice. Once rates go back to 8% or 10% and the govt increases tax on interest to 2% or 3%, all those who saved religiously in ISAs over the years will make a killing compared to those who dint.

ISA is merely a means to an end and may not be right for everyone. Its even more confusing now when rates are so low. It may be best to put long term savings in ISAs, no need to max it our every year, while keeping short term savings in higher rate normal saver accounts.

A day will come, for those saving smaller amounts and those maxing it out, when the tax free interest on a small or a large pot of money in an ISA earning interest thats tax free will make you smile and be happy you had the common sense to keep something aside in an ISA. I am following this principle and pretty sure I will reap the rewards down the line

To end with a simple example, a person saving £100k over 20 years in ISA versus a person who doesnt and assuming just a single year where you get 10% interest while a regular saver pays 8% or maybe the tax is high at 3% then the return difference is significant : £10000 a year interest in an ISA versus £7000 to £8000 in a normal savings account - food for thought no? What if the taxes are even higher? What if income tax slabs get higher? Who knows?

DV

I can't see the point in planning keeping £100k plus in cash for 20 years, that sort of time is ideal for share based investment which certainly should be in a s&s ISA.

When the average cash ISA balance is around £7k I'd still say there is no point using ISAs until rates are better inside them as you can immediately get money back inside with a single years allowance.

Alter_ego

jimjames wrote: »

I can't see the point in planning keeping £100k plus in cash for 20 years, that sort of time is ideal for share based investment which certainly should be in a s&s ISA.

You may see it differently as you get older, I am 72 and can see the point of cash on easy access. It may be there 20 yrs, or I may use it tomorrow if I decide to buy a new car/stairlift. Also I may not be around to wait for the right time to withdraw from stocks and shares.

darkvader

So there is no doubt, I dont believe in only Cash ISAs. My response was to state the advantage of the ISA shelter versus saving cash in a regular account, nothing more.

I personally invest only in S&S ISAs for my and OH's long term plans. Doubt I will have ever have £100k sitting in a cash ISA.

Regarding interest rates, wasnt it a very different picture 10 years back? So who's to predict it cant go back to that level in another 10 years? No crystal ball gazing here for sure. Long term savings should be invested in the market through S&S ISA. If one feels its too risky then park some in a Cash ISA but definitely not all of it. For short term savings, I too dont see any advantage of a Cash ISA. But if someone is just keeping money aside thinking they may need it and dont have a definite plan then its sensible to get the ISA shelter nicely wrapped around it

DV