Stocks and Shares ISA or NISA limits

Your_Hero

masonic wrote: »

Consider the counter example, where I go to 'All-in-one Investment Solutions Limited' and take out their Universal NISA, which allows me to hold a wealth of investments, but also pays me a table topping tax-free interest rate on my cash. Suppose I contribute £15,000, holding £5k in cash and the rest in a Vanguard Lifestrategy fund. Let's suppose I continue to invest in the same proportions up to £50k. My intention is never to invest the amount I leave in cash, so my point is that it would be rather unfair at that point not to have the same FSCS protection as somebody who did exactly the same, but split their NISA into separate components.

Consider also the situation where I may wish to 'lifestyle' my NISA gradually from investments into cash and I hold both in the same component. Even though I have no intention of reinvesting the cash, I would be subject to a lower limit of compensation simply by virtue of the choice I made not to have separate cash and S&S NISAs.

In this situation, because it is within the ISA, for FSCS purposes this cash element is protected to the tune of £85,000 same as a Cash ISA. This was not the bit I was referring to where it had £50,000 limit. From my first link in post #2:

"The FSCS also provides this £50,000 protection in the event your platform collapses while it holds some of your client’s uninvested money, for example if you leave a small portion of your pension in cash while the rest is invested.

This applies if the cash was unallocated in a client account, but if it were in the cash part of a client’s Isa account the £85,000 deposit limit would apply. "

But for ISA contribution purposes, you have only used your Stocks and Shares ISA and if you still had any allowance left you could choose another Cash ISA provider to fill it up.

colsten

Why would you want to hold more than £50K in cash in an S&S ISA?

masonic

Ok, I think I finally understand your earlier points now.

masonic

colsten wrote: »

Why would you want to hold more than £50K in cash in an S&S ISA?

The same question could be asked of any type of ISA, but there are sometimes valid reasons for having that much allocated to cash. Supposing these much-hyped NISAs spring up that are competitive for both S&S and cash, then we might see people who want to keep everything in one place adopting them.

colsten

masonic wrote: »

Supposing these much-hyped NISAs spring up that are competitive for both S&S and cash, then we might see people who want to keep everything in one place adopting them.

If there were any competitive combined S&S and cash ISAs, I would of course agree with you. But there aren't any, and it is not very likely that there will be any any time soon.

If you think about it, it would be quite difficult / impossible for a typical S&S ISA platform provider to pay any competitive cash interest rate without turning into a bank or P2P lender or having a mutually profitable partnership arrangement with a bank / P2P lender.

Equally, the costs of suddenly becoming an investment platform isn't an easy / cost-effective / desirable move for a bank or building society that knows how to make money out of savings accounts.

So if you do have a need for £50K in cash for any length of time (4-6 weeks plus ), there are most likely a lot better places than S&S ISAs. Even a cash ISA might be better.

masonic

colsten wrote: »

If you think about it, it would be quite difficult / impossible for a typical S&S ISA platform provider to pay any competitive cash interest rate without turning into a bank or P2P lender or having a mutually profitable partnership arrangement with a bank / P2P lender.

Well I do recall HL paying a reasonable rate on large cash balances in the past, but of course it was taxed back then, so the net rate was less interesting. Of course HL now regards interest on uninvested cash to be a valuable income stream for them after being squeezed by the RDR, so I don't expect they'll be offering anything in the way of competitive interest, but others might.

colsten

We seem to have a different view on what reasonable interest rates are - I have never seen them offering more than 1% pre-July 1 this year. They currently pay 0.1% for over £50,000 in their S&S ISA.

They have been offering a separate cash ISA for a while. The max I remember seeing was 2% - at a time when you could get 4.25% at Nationwide. Currently the HL cash ISA is a variable rate of 1.0% gross until 1 October 2014, and 0.6% gross thereafter.

I have seen just one S&S provider (sorry, can't remember who it is) who offers 1% for cash held in their S&S ISA.

You can examine the cash ISA market from whichever angle you like and you won't find anything even remotely exciting.

masonic

colsten wrote: »

We seem to have a different view on what reasonable interest rates are - I have never seen them offering more than 1% pre-July 1 this year. They currently pay 0.1% for over £50,000 in their S&S ISA.

In 2007 they were operating on a tiered scale up to 5.38% AER - on £50k this would have worked out at 5.1% AER (c.f. 5.5% base rate) (source). Obviously that would not have been the best rate available at the time, but it was not terrible and if you want to use cash as part of your asset allocation and want to have the freedom to adjust your allocation without the hassle of partial ISA transfers to and from a separate cash ISA, then with the freedoms we now have, that looks like it wouldn't have been a terrible option.

You can examine the cash ISA market from whichever angle you like and you won't find anything even remotely exciting.

I agree with you there, which is why when my 5% AER cash ISA matures tomorrow it will be going into S&S, but in the future ISA rates may become more attractive again.