ISA v Instant Saver

Hey_You

Just had notification that my Virgin ISA rate is dropping yet again to rubbish % and that instant saver accounts have gone up to 1.3%.
Should I cash in my ISA and put it into an instant saver?

Vortigern

Probably.

Depends on whether you'd have to pay tax on the other account, and at what rate.

badger09

Hey_You wrote: »

Just had notification that my Virgin ISA rate is dropping yet again to rubbish % and that instant saver accounts have gone up to 1.3%.
Should I cash in my ISA and put it into an instant saver?

Not enough information.

Depending on how much is in your ISA, you can get up to 5% on at least some of it. In a mix of current and regular saver accounts. If you are a basic rate taxpayer you can have up to £1000 savings interest a year tax free outside an ISA anyway;)

Dazed_and_confused

The non ISA interest isn't always "tax free", it depends on the op's circumstances.

Some basic rate payers will have a 10% marginal rate tax liability even if the interest is within the personal savings allowance rate band.

Some won't even be able to use the £1000 PSA rate band (although that itself won't increase any tax due to be paid).

Might not affect the op but impossible to say without more detail about their income, age etc

Vortigern

badger09 wrote: »

If you are a basic rate taxpayer you can have up to £1000 savings interest a year tax free outside an ISA anyway;)

More than that if the starting rate for savings is available.

badger09

@ Dazed and confused & Vortigern

I am of course fully aware of the tax implications, but was trying to keep response brief & possibly elicit more information from OP:)

Hey_You

Regular saver schemes appear to be a waste of time as one can only invest £250 a month for a year, therefore one only gets the full rate on the first contribution decreasing till the last only gives a single months interest.
As a basic rate taxpayer one can now receive up to £1000 savings interest a year tax free seeming to make cash ISAs redundant.
Hence my original Question.

Sam_J

Hey_You wrote: »

Regular saver schemes appear to be a waste of time as one can only invest £250 a month for a year, therefore one only gets the full rate on the first contribution decreasing till the last only gives a single months interest.
As a basic rate taxpayer one can now receive up to £1000 savings interest a year tax free seeming to make cash ISAs redundant.
Hence my original Question.

I don't understand this comment. You will get the full headline rate of the regular saver on all of the money held in the regular saver. It is nonsensical to recommend leaving your savings in a low interest account for the entire year, simply because you can't transfer all of it to a higher paying regular saver for the whole year.

Take the FD regular saver - 5% and £300 contributions - as an example. If your money is sitting in a 1% savings account, by opening the regular saver you will be receiving 5% on roughly half the money and 1% on the other half (on average) giving you an overall return of around 3%. If you simply leave your money in the 1% account, you only get 1%.

YorkshireBoy

Hey_You wrote: »

Regular saver schemes appear to be a waste of time as one can only invest £250 a month for a year

Per account, yes. I'm saving over £5K per month in regular savers, ranging from 2% to 5% AER, some from income and the rest being drip fed from accounts paying 1.2% to 1.5% AER.

I'm guessing all of it is earning more than your ISA is paying?

Don't discount regular savers (for saving from income) and drip feeding them (from existing savings such as you have)!