Cash ISA query

hansi

Is it worth having a Cash ISA anymore in view of the fact that the lowering of the interest rate will be just an excuse for financial institutions to lower even the very low rates already offered. I have about 5k in a Cash Isa and I think I'll transfer it to a instant access account as I won't pay tax on the interest anyway. Would this be the best way to go?

bigadaj

hansi wrote: »

Is it worth having a Cash ISA anymore in view of the fact that the lowering of the interest rate will be just an excuse for financial institutions to lower even the very low rates already offered. I have about 5k in a Cash Isa and I think I'll transfer it to a instant access account as I won't pay tax on the interest anyway. Would this be the best way to go?

Yes, it's a few years since its been worth having a cash Isa for most people.

A TSB current plus and nationwide flex direct will get you 5% taxed on most of the money, and the balance can be fed into the nationwide regular saver. No tax will be paid as it will be much less than your £1k savings allowance, or even £500 if you pay higher rate tax.

jimjames

hansi wrote: »

Is it worth having a Cash ISA anymore ?

No, not in my view

hansi wrote: »

I have about 5k in a Cash Isa and I think I'll transfer it to a instant access account as I won't pay tax on the interest anyway. Would this be the best way to go?

No. The best way would be to use current accounts where you'll get 5% on that amount. No cash ISA comes anywhere close.

xylophone

A TSB Plus current account, ( remember to go paperless) a Nationwide Flexdirect current account and a Tesco current account - £2000, £2,500, and £500 - move the monthly interest accruing on TSB and NW to Tesco - when NW rate ends after a year, open a second Tesco current account and move the NW deposit onto that?

You need to cycle round the cash to meet the monthly input required on TSB and NW - easily managed by same day SO of £1000 from NW to TSB and TSB to NW.

Of course, read all the T&Cs and remember that rates may change.....

YorkshireBoy

Are you a singleton, or are there two of you?

If the former, I'd go with the TSB/Nationwide set up in post #2 (thereby ensuring every penny I had would soon be making 5% AER) as follows:

£2K in TSB
£2.5K in the FlexDirect*
£500 in the Flexclusive regular saver

I'd then run the FlexDirect account down to just over £1K by shifting £500 each month to the regular saver. That way, if I came into a bit of money in months 3-4 onwards I'd have somewhere to stash it at the same 5% AER.

Then set up the following monthly SOs:

£1,008 from TSB to FlexDirect
£1,000 from FlexDirect to TSB

If there are two of you, then I'd go with 3 x TSB accounts and worry about other accounts once I was nudging £6K.


* Switching to this account via their RAF scheme would get you another £100...equivalent to almost doubling your return on this account in the first year!

eskbanker

Although I agree with all the above posters that there are clearly more attractive returns available elsewhere just now, it might still be worth reading the counter-arguments in Martin's "is the cash ISA dead?" article. Having said that, even if it's not actually dead, it must be on life support and fading fast....

jimjames

eskbanker wrote: »

Although I agree with all the above posters that there are clearly more attractive returns available elsewhere just now, it might still be worth reading the counter-arguments in Martin's "is the cash ISA dead?" article. Having said that, even if it's not actually dead, it must be on life support and fading fast....

It's always worth checking such a list to confirm but for someone with £5k I can't see any reason why a cash ISA would be suitable compared to bank accounts. Even if interest rates went to 10% you'd still have all your interest tax free even if higher rate taxpayer.

tgon

An email from First Direct today says its rate is dropping by 0.4% to 0.9% AER from October. Time to move I think.