Do I still need an ISA?

thinkingaloud

Hi,
My 12-month fixed rate cash ISA matures at the end of June. The closing balance will be approx £65,700.
Will transferring this to a new ISA be a pointless exercise, now I'm no longer earning? (Gave up work to be a full-time family carer, sadly no longer needed in that role).
Currently living off savings, so no earned income.
Interest earned last tax year (excluding ISA interest) £1,563.
State pension of £9,088 payable from March 2019.
The difference between 12 month fixed ISA and non-ISA rates seems to say it all (1.52% v 1.86%) - but as I've automatically taken advantage of ISA's during my earning years, i'm twitchy about taking the money out of its wrapper now.
Have I missed any good reason for sticking with an ISA in my current position?
Will be tying up the cash for another 12 months in any event.
Thanks for reading.

kidmugsy

thinkingaloud wrote: »

My 12-month fixed rate cash ISA matures at the end of June. The closing balance will be approx £65,700. Will transferring this to a new ISA be a pointless exercise, now I'm no longer earning?

Currently living off savings, so no earned income.
Interest earned last tax year (excluding ISA interest) £1,563.
State pension of £9,088 payable from March 2019.

The difference between 12 month fixed ISA and non-ISA rates seems to say it all (1.52% v 1.86%)

Will be tying up the cash for another 12 months in any event.

If you'd prefer a higher interest rate outside an ISA that's fine. With your personal allowance, your savings interest allowance, and your starting rate for savings allowance, you seem to be in no danger whatever of paying income tax.

Some suggestions for the use of your savings, including your cash ISA:-

(i) Remove £2,880 from your savings and contribute it to a SIPP (self invested personal pension) at Hargreaves Lansdown. After a couple of months they'll have received £720 from HMRC as "tax rebate" even though you pay no tax. You can then withdraw £900 as a tax-free lump sum, and as much of the remaining £2,700 as will remain tax-free in light of your other income and your Personal Allowance, namely all of it. Take that out in a lump, or monthly, as suits you best. BUT you must leave some small amount behind in the SIPP so you don't pay the early closure charge. (EDIT: I'd phone HL to see how small it can be.)

(ii) Repeat the procedure in 18/19 and onwards until you reach age 75, arranging your finances so that a chunk of your Personal Allowance is always available to receive that £2,700 tax-free. At the moment it looks as if your pension and the personal allowance are just going to allow that. Yippee! You'll be getting £720 per year tax-free. Note that since you will be leaving the bulk of the money in the SIPP for just a couple of months at a time you'd leave it as cash; you wouldn't choose to invest it.

(iii) If you are reluctant to invest in stocks and shares here's a tip. Just invest the £720 p.a. that has been conjured out of thin air by the SIPP procedure. Then overall it will have cost you nowt. You may still have decades to live; having a little bit of your capital in stocks and shares is probably wise. Investing slowly over the years is also probably wise. I suggest you see whether an S&S ISA at Vanguard might suit: they offer various cautious funds e.g. from the Lifestrategy or Target ranges.
https://www.vanguardinvestor.co.uk/what-we-offer/all-products?intcmpgn=isaready_fundlist_cta

If you think that even cautious stocks and shares might cause you sleepless nights then don't buy any. But it's probably your best long term defence against inflation reducing the value of your savings.

jimjames

You could retain part of the money in the ISA wrapper, maybe using S&S ISA instead so you still have protection from tax but also the chance of a better return - even the FTSE pays income of around 4% but obviously the capital will fluctuate.

The remainder could then go into the best savings account regardless of whether it's an ISA or not

thinkingaloud

Thank you both for your helpful responses.