Is the cash ISA dead?

colsten

KGriff wrote: »

I think to pull your money out from their tax free shelter would be a mistake in the long term.

It wouldn't be a mistake at all for anyone who has less than £15,240 "spare" for an ISA. The vast majority of UK adults doesn't, going by whichever published statistic you look at.

lancman

My wife and I have being doing the same as Kgriff for many years.


I am not sure that I would want to keep £20000 in my main current account, which has a debit card that can be lost or stolen.

jimjames

KGriff wrote: »

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.

I completely agree with the benefits of an ISA as a tax shelter long term - just not the cash ISA element of it.

It doesn't make sense to me to keep massive amounts of cash over 5 years plus so over that timescale a S&S ISA would make more sense for many people.

Short term it would seem to be logical to get the best return you can which isn't a cash ISA.

As such I think the cash ISA is dead but S&S ISAs are not.

lancman wrote: »

I am not sure that I would want to keep £20000 in my main current account, which has a debit card that can be lost or stolen.

If that's really a concern then the easy solution is to hide it or cut it up. I can't see security of a card being a major obstacle to getting a better return on your money.

anoncol

They are a joke only for the ignorant.

KGriff

colsten wrote: »

It wouldn't be a mistake at all for anyone who has less than £15,240 "spare" for an ISA. The vast majority of UK adults doesn't, going by whichever published statistic you look at.

Colsten,

The key words I used were/are 'in the long term'. If you don't begin to shelter the cash now from tax, it may become difficult to do that sometime later on in life, but my words were (I guess) aimed at serious long-term savers.

As I explained, my wife and I are fairly serious savers, beginning in our early thirties and we are now in our mid-fifties and personally I am glad to have sheltered our money from the tax man, whilst ISA's may not be performing well at this moment in time, things may change for the better in the years ahead.

If you don't use a years allocation, then come April of each year in the future, the potential to have sheltered your money begins to dwindle, but you are quite right it depends on how much you are able to save in the long term over your working lifetime.

ISA's may not be for everyone, but my experience was that watching the funds grow over the 'ISA years' (free of tax) helped encourage me and the wife to save and if decent ISA rates do emerge in the years ahead, my entire lifetime savings (and those of my wife) may go onto earn a high rate of interest all completely free of tax.

The final words in my post are also pertinent .. 'We need to wait and see'.

For my wife and me personally (and some of other relatives and friends), I don't think the cash ISA is dead... sleeping maybe, but certainly not dead.

KGriff

jimjames wrote: »

I completely agree with the benefits of an ISA as a tax shelter long term - just not the cash ISA element of it.

It doesn't make sense to me to keep massive amounts of cash over 5 years plus so over that timescale a S&S ISA would make more sense for many people.

Short term it would seem to be logical to get the best return you can which isn't a cash ISA.

As such I think the cash ISA is dead but S&S ISAs are not.



If that's really a concern then the easy solution is to hide it or cut it up. I can't see security of a card being a major obstacle to getting a better return on your money.

JimJames

I think of saving as an upside down pyramid.

My view is when you are young you are at the bottom apex end of the pyramid, with little money to invest as you start your working life.

This is the time to take the big risks to build your money pot, as quickly as possible. If you lose everything you are still young enough to start over.

As life progresses up the pyramid your savings and investments are spread wider. You often meet a partner/spouse and pool your incomes and the risks taken become slightly less year on year... You invest in your home, careers and children.

As you move through life you become less risky with your investments and move into a more balanced investment period and then eventually you get to the point where you are ready to retire... The widest top part of the upside down pyramid with a big pool of money. This is where risk should be fairly minimal. The aggressive saving strategies are more or less over and done with. I have heard this stage in life referred to as 'the cautious period'.

If you lose a substantial amount of your money now, it's probably too late to try to get it back.

At the point of retirement the hope is you have made enough money to fund your retirement to see you through to the end of life and perhaps leave something for your children (often it is the house we hope to leave) at the point of retirement you hope to be debt and mortgage free and have enough income, pension annuities and cash to do the things you choose to do in your post work years.

So my view is the stocks and share ISA plays a role in the risky and balanced period of your savings life, but at the point of retirement I believe there is a good case to have the security and minimal risks of cash ISA's instead ... So personally I think there is room for both types of ISA's in a long term plan.

I would not like all my retirement money riding on managed funds and equities etc. in my twilight years as I have seen such funds, even with a good investment-spread. quickly lose 30%+ in a short period of time.

However there is still room in my portfolio for some risk and so I still have some money in self invested s&s ISA's, but far less now than I had in earlier days.

jimjames

KGriff wrote: »

Colsten,

The key words I used were/are 'in the long term'. If you don't begin to shelter the cash now from tax, it may become difficult to do that sometime later on in life, but my words were (I guess) aimed at serious long-term savers.

As I explained, my wife and I are fairly serious savers, beginning in our early thirties and we are now in our mid-fifties and personally I am glad to have sheltered our money from the tax man,

The thing is, long term over 20 years holding large amounts of cash doesn't make sense either.

Short term get best rates, long term use S&S ISAs so either way I can't see how a cash ISA fits in.

ratechaser

Not dead to everyone... as an additional rate taxpayer, even the 2% I'm getting from Santander now is not that bad a rate. And given I have far larger amounts exposed to other asset classes through my pension (already maxed out for contributions), having a smaller complementary pot of cash in ISAs makes perfect sense to balance the portfolio, especially as I'm not aware of any pension cash funds that offer anything like 2% returns.

What's more interesting to me is the gradual reduction of annual pension tax relief, alongside the increase in ISA contribution limits... if as I have read, there a potential for tax relief on pensions to continue to reduce down to £10k/year under a future tory government, then suddenly ISAs will become critical to many more people as part of their retirement planning strategy. So no harm in maxing out your allowances right now if you're in the fortunate position to be able to do so, especially as it can be flipped freely between cash and S&S.

C_Mababejive

anoncol wrote: »

They are a joke only for the ignorant.

How can an isa truly be a tax shelter? The money that is in it has all surely been earned and taxed at source.

jimjames

C_Mababejive wrote: »

How can an isa truly be a tax shelter? The money that is in it has all surely been earned and taxed at source.

If it's not in an ISA any income from it will be taxed again. You're also sheltered from cgt.