Is the cash ISA dead?

MSE_Helen_S

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Is the Cash ISA dead? guide.

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Thanks folks,

Porcupine

One thing you don't mention: a cash ISA can be transferred to a Stocks and Shares ISA at any time.

This is useful as it protects you from capital gains tax as well as income tax, which becomes more of a problem the longer you hold an investment. It also makes filling in your tax return much easier, or means you don't need a tax return at all.

If you keep the money in a cash ISA it leaves that option open at a later date, while if you keep it cash unwrapped you have more tax and management to do should you decide to invest.

enthusiasticsaver

I would say that cash isas are a lot less attractive now low interest rates seem to be here for the foreseeable future. The only one I have now is the Coventry Bs fixed rate unti 2018 at 2.4%. My large Santander fixed rate isa which has been earning 3.10% is now going to stocks and shares as 2% is the best I can find. Our Santander 123 current accounts are earning more than that.

jimjames

Shame Martin still seems fixated with cash ISAs as despite the headline the article then proceeds to say why everyone should have one.

C_Mababejive

Cash ISAs are well and truly dead in the water. The trouble is of course,what else is there? Well you could dabble in stocks and shares and i dont know how others feel but i am reluctant to pump big money into any asset be it shares or funds at the moment.

The most im likely to do is drip feed but even then im wary and how much and into what?

A little share tip for you now...

Buy BG..

Why? Well the merger with royal dutch shell presents an opportunity.

Each BG share will be swapped for 383p and 0.4454 of a RDSB share.

BG is currently 1173p RDSB is 2086p

So the package is worth 1312p,

Buy BG today and make a profit of 139p per share plus at least one BG divi before the deal is done.

colsten

C_Mababejive wrote: »

A little share tip for you now...

Most S&S ISA investors wouldn't dabble in single company shares, and they certainly shouldn't if they are newbie investors.

jimjames

C_Mababejive wrote: »

Buy BG today and make a profit of 139p per share plus at least one BG divi before the deal is done.

You might want to read all the threads about Vodafone and SL to find plenty of people disappointed by similar advice.

KGriff

When cash ISA's began my wife and I both took advantage of their tax free status on savings and at the beginning of each financial year we deposited the annual allowance (as soon as we could afford to) and over the years we have built a pot of cash towards our retirement and old age, to supplement our work pension and state pension.

It has been nice to see the two ISA pots grow and has encouraged us both to save. In fact we have reached a stage where we would feel rather guilty to withdraw and spend the money ... How crazy is that?

It is an addiction to keep the ISA's topped up by each years annual allowance and even 'fun' each April to research and transfer them (now and then) to continue to chase the higher interest rates.

Anyhow any cash savings, we have been lucky to have above the annual cash ISA allowance, were/are going into either a self select stocks and shares ISA, or a higher rate savings account, or regular saver account, we currently use all types and aim for the highest return we can find. Thanks to the internet and MSE, things are much easier to research these days.

To say I was somewhat financially obsessed in the early days is an understatement and I have more bank/buildings society savings accounts and current accounts (many completely dormant) than I care to think about.

We also do our best to ensure we don't exceed the £85,000 in any one financial institution or double that amount, where we hold joint accounts.

In recent times I have gone over to current accounts such as Santander 123 account and set up standing orders to move £500 in and out the account monthly and set up those direct debits (TV, phone, gas, electric etc.) that get a 1, 2 or 3% discount whilst trying to ensure the balance stays at the maximum £20,000. Occasionally the account can be a bit of a nuisance to manage, but you have to do these things to get full advantage of the rates on offer.

I'm also using the Santander 123 credit card to get money back on shopping and petrol etc. (paid off monthly in full by direct debit).

Money over and above these accounts goes into a high rate savings accounts and some long term 10 year savings plans available to me via work.

So you could say my wife and I have a fair bit of experience when it comes to saving and yes we... er .. I, have missed opportunities along the way and made investment mistakes, like the next man.

Anyhow the thing I want to say is the cash ISA is not dead because I have little doubt the tax free status for them, will still be there long after the Santander 123 account and similar accounts have become dead in the water. I think to pull your money out from their tax free shelter would be a mistake in the long term.

Whilst ISA's may not be flavour of the month at the moment, I too think they will make a comeback and their rates will become market leading once again, not least because the financial institutions know that the people with the fairly substantial pots of money are good savers and provide a reliable source of cash and are often prepared to leave it in situ for the longer term and for that reason I suspect the financial institutions will want to attract those kind of people. They also know that they are the type of people that are 'financially responsible' and more likely to keep up payments on their lending.

The Banks etc. not only need our money to lend out to others and invest themselves, but they also need to pass the financial stability stress testing being imposed on them.

So I think the financial institutions will eventually raise the rates and attract these type of savers. If you look at Santander this year they are offering higher rates on their ISA to their 123 current account holders and the 'better' offers are starting to creep back in on fixed term ISA's.

What better for a single financial institution, than to hold onto a customer who has a pot of money in a fixed term ISA and also has a mortgage, loan or credit card with them, that is being run responsibly. The type of customer that any bank or building society wants.

So personally, I think the ISA provides that type of 'reliable' status for an individual and the only way to attract that type of customer is to offer them a decent interest rate or discounts on their spending.

The Santander strategy is the first to lead the way and I think others will begin to follow suit, hopefully hiking up the ISA interest rates along the way.

I for one, will not be taking money out my ISA just yet. We need to wait and see.

chucknorris

I started switching my cash ISA's into SS ISA's a couple of years ago, and all that remains is my last 3 year fixed term cash ISA. I will probably switch that one too next April, when it matures. The dividend income from my SS ISA's is over 3%, which compares with the best of savings rates available, and maintains the ISA status, if I ever wanted to later switch some of it back to a cash ISA. In the meantime I have enjoyed quite a bit capital growth in addition to the dividend income.

veryintrigued

They still have a place in our household. There are still some cracking ISA regular savers on the market if you're lucky enough to be a member or live close.

e.g. 3.5% from Saffron or 3.0% from Notts especially if fed from any of the 3% C/As around (assuming you've filled the > 3% C/As).

The 'problem' arises when you're looking for decent homes after the year (assuming you dont want it to languish at poor rates) is up if you've already used the majority of the high paying C/As.

boywonder1978

I wish Martin would tier his advice based on status/income.

Unless you are absolutely minted, surely ISAs aren't worth it, especially given you can put in £15k per year in an ISA at any time.

I've been saving like mad for 3 years but only just made it to Santander's 20k limit.