New isa rule on cash/share movement

vistaverde

Currently when I sell investments in a stocks & shares ISA the proceeds go into a 'cash holding account' that earns virtually nothing.(Cofunds platform) In the rule changes that come into force in July, my understanding is that you'll be able to move the proceeds from ISA protected share sales into a cash ISA that actually pays a real return until you are ready to reinvest in other equity products. Has anyone come across any single institution/platform which is promoting such a 'joint account'? It certainly will make a difference to have ISA protected cash holdings earning something rather than nothing yet easy to move back into equities when you are ready to do so. Many thanks - V V

ColdIron

I think the problem will be that the rates on the cash ISA will be pretty poor, HL have one but it's currently offering 1%

Archi_Bald

There are rumours of combined cash/S&S ISAs to arrive in July but I wouldn't hold my breath regarding interest rates. You'll basically just get a token rate.

http://www.telegraph.co.uk/finance/personalfinance/investing/isas/10788557/Brokers-race-to-launch-cash-and-shares-super-Isas.html

dunstonh

Archi_Bald wrote: »

There are rumours of combined cash/S&S ISAs to arrive in July but I wouldn't hold my breath regarding interest rates. You'll basically just get a token rate.

http://www.telegraph.co.uk/finance/personalfinance/investing/isas/10788557/Brokers-race-to-launch-cash-and-shares-super-Isas.html

All the platforms will be switching their cash account to tax free on S&S ISAs. Detail beyond that is light. However, platform charges would need to be taken into account.

vistaverde

Many thanks to everyone for the quick and useful comments. To be honest, even the offer of 1% tax free would be better than what we are earning at the moment on quite tidy sums of cash tied up with Cofunds. One can but hope that one of the financial providers can see the value of marketing a product that links the two types of ISA's together. What's not to like about this from the financial institutions point of view? Keeping your money in one place has to be advantageous for them as well as it would be to their customers.

kidmugsy

Alliance Trust Savings has a banking licence so perhaps they'll cook something up.

grey_gym_sock

1 of the ways that platforms make money is by getting a small percentage from any cash you leave on deposit with them. if they are putting deposits with a separate bank, the bank pays the platform a percentage on deposits placed with them (instead of paying slightly higher interest rates on your money).

the current ultra-low deposit rates have also had the effect of reducing the amount that platforms can make from deposits. so i doubt that they are keen to give much more away. the only certain gain is that whatever rate they do pay will no longer have 20% deducted for HMRC.

however, there will be some new competitive pressure, in that, once S&S ISA clients could transfer uninvested cash out to an ordinary cash ISA (and perhaps transfer it back later on when they are ready to reinvest), platforms may be prepared to reduce their cut, and so allow slightly higher interest rates to be paid, in order to encourage ppl to keep money with them.

but i suspect we're still talking about a lot less than 1% (in the current interest rate environment). perhaps they could offer a bit more for ppl prepared to take a fixed rate for (for instance) a year.

Archi_Bald

Skandia have set the benchmark to a dizzying 0.37%, according to the Telegraph. And it is unclear whether this is before or after other charges they levy.

jimjames

vistaverde wrote: »

Many thanks to everyone for the quick and useful comments. To be honest, even the offer of 1% tax free would be better than what we are earning at the moment on quite tidy sums of cash tied up with Cofunds. One can but hope that one of the financial providers can see the value of marketing a product that links the two types of ISA's together. What's not to like about this from the financial institutions point of view? Keeping your money in one place has to be advantageous for them as well as it would be to their customers.

Can I ask why you are holding so much cash in a s&s isa?

vistaverde

Having been fully invested in the markets over the past ten plus years, we made a decision to liquidate our holdings (into cash) to take advantage of rising markets last Spring. However, we've been sitting on our hands since then, as I still had worries about whether the 'apparent recovery' would last. Hence, the large cash sums still sheltered by the ISA envelope waiting to be reinvested.


Everyone's comments on this topic are very useful, so thanks to all for your postings.

IronWolf

It will probably take a while for us to see what will be the new "norm", companies will probably test out different products to see which works well. I would expect one of them to release a NISA that gives a decent rate on cash.

If interest rates rise then you could also use money market funds to get decent interest rates as they will no longer be excluded from S&S ISA, but you have to be careful of dealing fees, they can eat away at the interest unless you are moving substantial amounts.