Is an Isa Worth it?

iBeast

Hi all
I was looking at opening up an Isa, but looking around the moneysupermarket it seems the regular saver gives better rate of intrest after tax than an isa. 1st direct are giving 4.8% after tax much better than isa rates i dont understand why i should go for an isa just because it is tax free if im not earning more than i can do.
I would appreciate some feedback if there is something that i have missed.
Thanks in advance

[Deleted User]

Hi,

4.8% seems high, are you tied in for 5 years or so?

iBeast

oh no my bad it says there is a limit of 3600

colsten

iBeast wrote: »

Hi all
I was looking at opening up an Isa, but looking around the moneysupermarket it seems the regular saver gives better rate of intrest after tax than an isa. 1st direct are giving 4.8% after tax much better than isa rates i dont understand why i should go for an isa just because it is tax free if im not earning more than i can do.
I would appreciate some feedback if there is something that i have missed.
Thanks in advance

It all depends on how much money you have available already, how much you want to add to it over what timescale, and how much you expect to spend when.

For short to medium term savings below approx £50,000, current accounts and regular savings accounts pay the best interest if you are a basic rate tax payer. For higher rate ones, looking at short and medium term, cash in current accounts and regular savers are still the best option up to about £20K, with anything above that perhaps in cash ISAs.

If you are in for the longer term (5 years upwards), investments in S&S ISAs promise the best returns. Although some money could also go into company or private pension schemes.

For many people, the best choice is a mixture of some or all of the above.

Totton

colsten wrote: »

..... For short to medium term savings below approx £50,000, current accounts and regular savings accounts pay the best interest if you are a basic rate tax payer....

This is true but you do not have the tax protection outside of the ISA. Now you may not need that protection but who knows how the Government will treat tax in the future? A weekend article in the paper highlighted talk of increasing taxation by merging tax and nics, that may not happen but the attraction would be the lower rate at which nice are collected and how thanks to nice our personal tax levels are not at the 10k we are told but much lower.

My own two cents is that having the money protected within a NISA is the way forward, you may lose a little on the interest rate short term but if you want longer term protection then build up your NISA's as each years allowance is lost once the year ends.

HTH
Mickey

colsten

I am talking about short to medium term, i.e. less than 5 years. If you are planning to spend the cash by then, there is absolutely no point at all to seek a tax shelter in which your money probably loses value because of inflation.

Add to this that most people won't even get near the annual ISA allowance so could put a lot of their money into ISAs if your increased tax scenario comes into play. Be realistic as well - it won't come into play this side of a general election, and not very quickly thereafter, either. Tax increases are normally announced months in advance, and generally come into effect in a new tax year. So you could tip £15K into an ISA just before the end of the old tax year, and immediately thereafter another £15K in the new tax year. £30k done and dusted.

As for longer term considerations: - as I have already said - I am all for ISAs (but of the S&S variety) and/or pension contributions.

Each to their own, of course - if you fear you might lose money over the next 3-5 years, and if you are more comfortable with the miserly cash ISA rates, cash ISAs are what you should choose.

PS. That paper you read wasn't by any chance the same one that predicted the total demise of tax-free savings and investments less than 18 months ago?

workingnomad

At the current low interest rates saving anywhere is a waste of time!

colsten

workingnomad wrote: »

At the current low interest rates saving anywhere is a waste of time!

That's a very untrue comment.

Totton

colsten wrote: »

I am talking about short to medium term, i.e. less than 5 years. If you are planning to spend the cash by then, there is absolutely no point at all to seek a tax shelter in which your money probably loses value because of inflation.

Add to this that most people won't even get near the annual ISA allowance so could put a lot of their money into ISAs if your increased tax scenario comes into play. Be realistic as well - it won't come into play this side of a general election, and not very quickly thereafter, either. Tax increases are normally announced months in advance, and generally come into effect in a new tax year. So you could tip £15K into an ISA just before the end of the old tax year, and immediately thereafter another £15K in the new tax year. £30k done and dusted.

As for longer term considerations: - as I have already said - I am all for ISAs (but of the S&S variety) and/or pension contributions.

Each to their own, of course - if you fear you might lose money over the next 3-5 years, and if you are more comfortable with the miserly cash ISA rates, cash ISAs are what you should choose.

PS. That paper you read wasn't by any chance the same one that predicted the total demise of tax-free savings and investments less than 18 months ago?

Fair enough but you didn't explain your premise nor did the OP state short to medium, as for your last comment no it wasn't the same paper. Besides which, I offered advice and don't need your attempt to belittle me. My own investments are doing very nicely so I'll leave you to your own arsey responses.

jimjames

workingnomad wrote: »

At the current low interest rates saving anywhere is a waste of time!

You can get 5% currently which is better than ISA rates were some years ago.

For small amounts it's even better and you can get equivalent of 12.5% on £1000. Might be a waste of time for you but this is a money saving site and most people would be quite keen to earn £125 on £1000 they have saved.

Or if these rates still aren't enough for you then look at investing instead for better returns.

colsten

Totton wrote: »

don't need your attempt to belittle me. My own investments are doing very nicely so I'll leave you to your own arsey responses.

I have no idea what you are on about. I have not attempted to belittle you, nor have I criticised your investments - not least because I have no idea what they are, but even if I did, I couldn't possibly be tempted to. So please refrain from accusing me of having some sort of an agenda that only exists in your mind.