NISA or savings account?

TickersPlaysPop

Hi all

I apologise if this has already been discussed , but I couldn't find a thread with my question....

Money saving expert recommends keeping your cash in savings accounts this year until the deadline for NISA in March 2015 and then putting the cash in to benefit from tax free in future... however...

I've always predicted the interest rate movements on what banking products are available and in what direction they are changing... I.e. When low interest rate fixed mortgages are disappearing or the interest rates of fixed products are trending up over time it means rates will increase.

Therefore , to me it makes sense that the huge jump to 15k max is a strong indication that rates will stay low for a long time... which confusingly is contrary to what is coming out of BOE's mouth... But actions speak louder than words.

Also, the ISA rates are lower than regular saving accounts..... which is puzzling to me. If anybody can explain this to me I would be very grateful. I read somewhere that due to some complication holding money in 'current accounts' is more of a benefit to banks at the moment compared to savings accounts.

Basically my question is.... If you are a lower rate tax payer Is it worth putting money into a NISA up to the max? If rates of NISA's are likely to stay low for 1, 2 or more yrs it makes more sense to pay tax on 20% tax on interest and earn more net interest with Santander 123 etc.

But, the fact I might miss out on tax free interest in the distant future is a conundrum! Maybe, the rules and regs could be changed for this yrs NISA in future? Can the NISA contract be changed by government?... Have they ever changed benefits of the old Tax free wrapper products?

jimjames

TickersPlaysPop wrote: »

Hi all

I apologise if this has already been discussed , but I couldn't find a thread with my question....

Money saving expert recommends keeping your cash in savings accounts this year until the deadline for NISA in March 2015 and then putting the cash in to benefit from tax free in future... however...

I've always predicted the interest rate movements on what banking products are available and in what direction they are changing... I.e. When low interest rate fixed mortgages are disappearing or the interest rates of fixed products are trending up over time it means rates will increase.

Therefore , to me it makes sense that the huge jump to 15k max is a strong indication that rates will stay low for a long time... which confusingly is contrary to what is coming out of BOE's mouth... But actions speak louder than words.

Also, the ISA rates are lower than regular saving accounts..... which is puzzling to me. If anybody can explain this to me I would be very grateful. I read somewhere that due to some complication holding money in 'current accounts' is more of a benefit to banks at the moment compared to savings accounts.

Basically my question is.... If you are a lower rate tax payer Is it worth putting money into a NISA up to the max? If rates of NISA's are likely to stay low for 1, 2 or more yrs it makes more sense to pay tax on 20% tax on interest and earn more net interest with Santander 123 etc.

But, the fact I might miss out on tax free interest in the distant future is a conundrum! Maybe, the rules and regs could be changed for this yrs NISA in future? Can the NISA contract be changed by government?... Have they ever changed benefits of the old Tax free wrapper products?

Simple answer, for smaller amounts an ISA is currently pointless. You'll get far better rates from current accoints. , up to 5%. The mse guide is stuck on an old record to use ISAs when for most people that isn't best place.

TickersPlaysPop

When you say small amounts, what values do you have in mind? I have more than 15k available to play with.

Also, are you sure that NISA interest rates will always be significantly lower than saving accounts as they are now? I might kick my self in 5 yrs time if NISA rates increase, if I don't put it in before March 2015 I'll miss the opportunity.

SallyG

Triumph of hope over experience?
Remembering the good ole days:
"first direct takes pole position with launch of 6.25 per cent cash ISA
09 Mar 2005"

jimjames

TickersPlaysPop wrote: »

Also, are you sure that NISA interest rates will always be significantly lower than saving accounts as they are now? I might kick my self in 5 yrs time if NISA rates increase, if I don't put it in before March 2015 I'll miss the opportunity.

You'll only miss the opportunity if you have (or will have in future) significantly more than £15k. If not then it is better to get the highest return you can in the meantime.

When the average savings is under £2k for most people an ISA isn't the best option currently.

Where is this money at the moment? Already in ISAs? If not, is there a reason why?

TickersPlaysPop

So you are sure NISA's will have then same 15k limit always? I'm not sure you can be certain?

My cash is in a Santander 123 account at 3% and a fixed 2 yr ISA at 3% that finishes April 2015.

Surely an ISA limit jumping to 15k is a sign interest rates are not going to increase fast anytime soon?.... Also it seems banks are now happy to set different rates for ISA's and savings accounts.... Where ISA's are lower!... How is that possible?

Archi_Bald

TickersPlaysPop wrote: »

So you are sure NISA's will have then same 15k limit always? I'm not sure you can be certain?

Nothing won't ever be certain, but I reckon it would take a suicidal Chancellor and governing party to cut the ISA allowance.

TickersPlaysPop wrote: »

Also it seems banks are now happy to set different rates for ISA's and savings accounts.... Where ISA's are lower!

Savings account rates aren't as good as ISA rates - or should I say they are even worse than ISA rates.

TickersPlaysPop

Archi_Bald wrote: »

Nothing won't ever be certain, but I reckon it would take a suicidal Chancellor and governing party to cut the ISA

Really? Maybe they are quite sure rates will stay low for a long time and are comfortable to introduce such a high limit because they know it won't result in a large loss of tax revenue? Again pandering to the banks to help encourage more cash deposits.

Archi_Bald wrote: »

Savings account rates aren't as good as ISA rates - or should I say they are even worse than ISA rates.

I'm sorry, but this is wrong. Most ISA's at the moment are less than 2.6% and when I can keep cash in savings at 3% I a better off.

colsten

TickersPlaysPop wrote: »

I can keep cash in savings at 3%

This is very interesting - where do you get 3% in a savings account please? I'd like to move a significan sum of money in there

TickersPlaysPop

colsten wrote: »

This is very interesting - where do you get 3% in a savings account please? I'd like to move a significan sum of money in there

Santander 123 account

Technically it is not a savings account it is a current account and you can open 2 in each name, so for couples that is 80k. The max is 20k per account and you need to have 2 direct debits and put in 500/mth to qualify for 3% interest. the fee is only £2 mth which is easily cancelled out if you select 2 large bills for the direct debits such as energy and council tax whic both qualify for money back.

It has been top of the money saving expert charts for ages... So I am surprised you haven't heard of this.

Lloyds and another bank allow multiple accounts to be opened per person..... So if you put the time in you can get a lot of interest from a lot of money.... Also the criteria for putting money per mth in can be cycled using standing orders so it all automatically looks after itself.

TickersPlaysPop

It all sounds crazy, but there is some technical complication where banks benefit from lots of current accounts on their books... Don't ask me to explain because I don't know!

The only slight concern for me, which many don't share is the tentative link to Spain and it's shaky economic state as a country and their banking sector. Santander is not supposed to be linked between Spain and UK, so if Spain goes belly up UK Santander accounts would be fine apparently.... I'm sceptical.