How much should I leave in my ISA?

NH2004

I've finally managed to get myself on the property ladder.
Due to complete in September.


I'm undecided on where it's best to leave the money I will have left. Currently my accounts look roughly like this:


Santander 123 £20k
ISA £43k
Savings Accounts £55k


After paying the deposit for the house, legal fees, stamp duty and costs, as well as decorating and furnishing the house, I aim to have about 20k left in the bank.


My question is as in the title: How much should I leave in my ISA?


I tend to always leave my Santander 123 account topped up to 20k, as it is paying 3% interest. The ISA has recently dropped to 1.6%.
It goes against logic to remove money from an ISA, but I feel I get a better return on the 123 account, even allowing for the tax advantage of the ISA.


What would you do?

bsms1147

Go for highest interest. You can always replenish the ISA later on (at 15k a year), when (if) rates improve.

BarrBru

Why keep so much in cash when if you can afford to save for a while you can make so much more in a stock market exposed ISA?

NH2004

Got badly burned years ago when investing in stocks and shares. So prefer to keep my money at hand in safe, if albeit "potentially" less profitable options.

gadgetmind

How did you get "badly burned"? The usual ways are 1) taking on too much risk by not diversifying enough, 2) panicking when values drop (as they do) and selling before they went back up (as they tend to).

If you avoid the pitfalls, and have a long enough investing horizon, then equity investing is very hard to beat.

jimjames

NH2004 wrote: »

Got badly burned years ago when investing in stocks and shares. So prefer to keep my money at hand in safe, if albeit "potentially" less profitable options.

I've seen this on a few threads now.

Can you explain how you got badly burned with a S&S ISA? Sure shares drop in value sometimes as seen in 2008/9 but anyone who accepts that and held - or even better added more - would now be above their initial investment and recovered any losses.

For long term money it seems crazy to me to have it in anything other than S&S whether as pension or ISAs.

NH2004

Invested a lump sum back in 2000, was then adding monthly payments. Had it for 10 years and just about broke even.
Wasn't in a high risk fund either.


So no S&S not for me!
It's a matter of personal choice!

Snakey

Are you going to be getting a mortgage? As you are set on keeping your investments in cash, if your mortgage rate is higher than your post-tax interest rate then you are losing money each year. If you want to retain access to the cash you could look into offset accounts. This would also be good if your savings generally go up each month - just shift all your spare into the offset account the day before payday.

Now that the annual ISA limit is about to shoot up, it's less vital to max out your contributions each year. You could put £20k back in again in a year and a day (at most).

Consumerist

NH2004 wrote: »

Invested a lump sum back in 2000, was then adding monthly payments. Had it for 10 years and just about broke even.
Wasn't in a high risk fund either.

Sounds very typical of funds managed and recommended by banks.

With £20K to play with you could consider a TSB Plus current or two paying 5% AER on up to £2K each; set up SOs between them to meet the £500 pm funding requirement. Club Lloyds current account pays 4% AER on £4K - £5K balances for £1,500 pm funding (use exchange SOs from/to Santander) and two direct debits paid from the account.

Much depends on how much setting-up you want to be bothered with.

gadgetmind

NH2004 wrote: »

So no S&S not for me!
It's a matter of personal choice!

Fine, but you'll have to accept that rather than your money being able to grow and/or generate income, it will instead struggle to maintain its buying power.

atush

Consumerist wrote: »

Sounds very typical of funds managed and recommended by banks.

With £20K to play with you could consider a TSB Plus current or two paying 5% AER on up to £2K each; set up SOs between them to meet the £500 pm funding requirement. Club Lloyds current account pays 4% AER on £4K - £5K balances for £1,500 pm funding (use exchange SOs from/to Santander) and two direct debits paid from the account.

Much depends on how much setting-up you want to be bothered with.

Exactly, poor fund choice provided by a poor outlet.

Too bad you are now scared off equities for life because if it, you would have had a better experience and be better off now if you had used an IFA and not a bank.