ISA or savings account

jimjames

bostonerimus wrote: »

The gains you get inside an ISA are tax free.....why would you move your money outside of an ISA?....unless after tax you can get a better return outside the ISA.

For £2k, it's a no brainer. You can move it back in if rates massively jump

toothdoctor wrote: »

You want to retain the tax free status as rates on cash ISAs may increase in the future.

It's daft to suggest it's worth keeping a cash ISA just for the tax benefits on £2k. Far better to maximise interest which will be 10x more than the 0.5% you get inside an ISA

18cc

Agreed for £2k it's a no brainer. For others with large amounts in my opinion ISA is better for the following reasons:


1. you keep the tax free status for ever so if rates go up you keep the tax free interest even if it is above the personal savings allowance.


2. if you use fixed-term bonds say 2, 3, 5 years, you get a better rate. For ISAs they HAVE to allow you to access your money so if 9 months into a 2 year fixed-term bond you need access then you will get it with an ISA (even though you might pay a penalty) whereas with a fixed-termn non-ISA there is generally no access until maturity.


3. it is easy to transfer your ISA to another provider should you wish. It is done at your request and happens fairly quickly. For non-ISA it generally involves transferring your savings to (say) your current account and from there to your new savings account. For large amounts, this can be a hassle (daily limits, payments blocked whilst you try and conving the fraud team it really is you making a £15k payment to a new payee, or even worse case scenario of you typing in wrong details and sending your savings to someone else's random account etc etc).

eskbanker

18cc wrote: »

Agreed for £2k it's a no brainer. For others with large amounts in my opinion ISA is better for the following reasons....

For those with small amounts, there are usually better options than cash ISAs because tax is unlikely to be much of an issue and better rates are available in non-ISA accounts, as covered in previous posts above.

For those with large amounts, it's unlikely that most would need to keep it in cash form, so investing rather than saving (once emergency fund established) is likely to be better. It still makes sense to do so under the ISA umbrella but in S&S ISA form rather than cash ones.

So, those for whom cash ISAs are the best option are a small and declining niche, excluding the specialist HTB/LISA products for first time buyers.

jimjames

18cc wrote: »

Agreed for £2k it's a no brainer. For others with large amounts in my opinion ISA is better for the following reasons:


1. you keep the tax free status for ever so if rates go up you keep the tax free interest even if it is above the personal savings allowance.

If you want to keep tax free for ever then a cash ISA is still a bad idea. A S&S ISA would be far more appropriate for long term money

TheShape

toothdoctor wrote: »

The OP has £2000 in an ISA (I assume non flexible) If this is taken out of the ISA wrapper then you lose the tax free status on this amount forever. Yes at the moment the OP is unlikely to earn over the PSA of £1000 at current rates but what if rates rise?

They receive an extra £5:j

BabuBabu

Thank you everyone. So I upgraded my Flexaccount to FlexDirect and I transferred the money over. I have also set up a standing order so that £1000 goes out and back in every month as advised.

Can I ask a related question? I have £50 spare a month to invest. Ideally I would like a passive investment (I am reading around investment) and the Vanguard Life Strategy ISA would have been ideal but their monthly minimum is £100. Any other low cost choices out there?

ValiantSon

BabuBabu wrote: »

Thank you everyone. So I upgraded my Flexaccount to FlexDirect and I transferred the money over. I have also set up a standing order so that £1000 goes out and back in every month as advised.

Can I ask a related question? I have £50 spare a month to invest. Ideally I would like a passive investment (I am reading around investment) and the Vanguard Life Strategy ISA would have been ideal but their monthly minimum is £100. Any other low cost choices out there?

If you want to invest in an S&S ISA and like the Vanguard funds (and their low platform fee) then you could always save up the £50 in a regular saver and at the end of the year you will have more than enough (£616.13 on 5%) to open the ISA with the minimum £500 deposit, and then you can make regular £50 p/m deposits after that. The monthly minimum only aplies if you don't open the account with £500.