Would it be worth putting money in an ISA even at 0%?

Mr.Boy

I was thinking a bit about this the other day. You get your £15k allowance to put into an ISA and right now cash ISAs are paying virtually nothing, so you might think "I'll put it in a 123 account" or similar.

But if in 5 years time interest rates suddenly perk up, suddenly you have £75k or money sitting waiting to earn interest tax-free... if you don't invest it in the ISA now you miss your chance,

Is this good thinking if you view ISAs as long-term investment - to get the money into the ISA regardless of what it's earning now, so the money is there when things improve? Or is this a bad argument?

badger09

d000hg wrote: »

I was thinking a bit about this the other day. You get your £15k allowance to put into an ISA and right now cash ISAs are paying virtually nothing, so you might think "I'll put it in a 123 account" or similar.

But if in 5 years time interest rates suddenly perk up, suddenly you have £75k or money sitting waiting to earn interest tax-free... if you don't invest it in the ISA now you miss your chance,

Is this good thinking if you view ISAs as long-term investment - to get the money into the ISA regardless of what it's earning now, so the money is there when things improve? Or is this a bad argument?

If you're looking at long term investment, then it makes sense to use your annual ISA allowance in a S&S ISA

Ray_Singh-Blue

Also, 0% is not too shabby in years where other asset classes fall 20%+

YorkshireBoy

d000hg wrote: »

But if in 5 years time interest rates suddenly perk up, suddenly you have £75k or money sitting waiting to earn interest tax-free

If I'd maxed out my allowance over the next 5 years "even at 0%" and only got £75K back, I'd want to know where the other £40,240 had gone!

colsten

If you want to keep your money in cash as opposed to investing it, you should be looking into flexible ISAs.

Mind you, with all the imminent interest rates cuts, and those that have already happened, it's going to be tough now to find much better interest rates outside ISAs.

System

Or put it in your pension?

jimjames

d000hg wrote: »

Is this good thinking if you view ISAs as long-term investment - to get the money into the ISA regardless of what it's earning now, so the money is there when things improve? Or is this a bad argument?

If you view ISAs as a long term investment then you shouldn't be holding the money in cash - you should actually be putting it in investments. Long term they should easily beat cash and you don't appear to have any need for the money in the short term.

Mr.Boy

Sure but that's not exactly my question... Some people just don't want to invest in s&s (I am not one of those people) so I'm specifically asking if getting your investable allowance in the ISA now even if you don't think it will stand to make money for a few years is sensible, purely on the basis that this allowance is tax free forever and long term this outweighs the fact you aren't earning on it this year.

colsten

See post #5.

enthusiasticsaver

I would not say so bearing in mind there is now a £1000 personal savings allowance for all basic rate taxpayers. If you don't want to invest in funds/shares then National Savings income bonds, current accounts or fixed term cash bonds would be my option.

droopsnoot

d000hg wrote: »

Sure but that's not exactly my question... Some people just don't want to invest in s&s (I am not one of those people) so I'm specifically asking if getting your investable allowance in the ISA now even if you don't think it will stand to make money for a few years is sensible, purely on the basis that this allowance is tax free forever and long term this outweighs the fact you aren't earning on it this year.

I must say that my personal view is to not "waste" the annual ISA allowance, and have tried to use as much of it as I can in an attempt to feel better for not doing so when I first could have done. I have used Cash ISAs too much, though, but that's a different matter. But at least the money is in the ISA wrapper and can be moved about later.