What to do with old ISA?

akira181

I have a very old ISA that my mother set up when I was a child and she forgot about it sometime in the last 20 years. I've only recently found out about it and there's roughly £10k sitting in there doing nothing and I would like some advice on how best to maximise the savings potential.

I've paid off all my debt other than a mortgage and have a steady income so I don't need the money for myself (not considering my retirement in this case) however, my mother would like to move house in the next few years. She owns her current house but it's on a small island where there aren't many buyers and house prices are fairly low. Buying a house on the mainland, worst case would be an £80K difference to cover. She's retired and having my own mortgage to pay off, that £10k in the ISA might come in handy for that process.

So stocks and shares or fixed long term options (ideally she'd move within the next 3 years) are not ideal if we do need to use this money so any suggestions on what best to do with it?

eskbanker

If it's in your name and you have a mortgage then it's not immediately obvious why you'd choose to effectively gift the money back to your mother, but that's obviously a personal decision.

If you've decided that she should have it in a few years time, putting it into a fixed-term ISA may not be a bad thing because ISA rules mandate that money must be accessible at any time, even though interest penalties will usually be applied for early withdrawals.

Alternatively, if it can be committed for, say, three years, then a taxable fixed-term savings account may make sense as they're paying more than the equivalent ISAs (albeit stricter on access). Al Rayan's 2.42% three-year fix outperforms the best 3-year ISA (1.72%) by some distance....

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
https://www.moneysavingexpert.com/savings/best-cash-isa/

akira181

eskbanker wrote: »

If it's in your name and you have a mortgage then it's not immediately obvious why you'd choose to effectively gift the money back to your mother, but that's obviously a personal decision.

Mainly because it was her money to begin with and as a widowed parent bring up 2 young children as a chef, it must have been difficult for her to put that much away. My mother is now retired with minimal savings and my mortgage is less than a year old, so I'm assuming getting another mortgage to make up for that worst case 80k shortfall will be difficult. I'm thinking every penny will help and if I can use that 10K to move her closer to me, she'll be happier and therefore money well spent.

eskbanker wrote: »

If you've decided that she should have it in a few years time, putting it into a fixed-term ISA may not be a bad thing because ISA rules mandate that money must be accessible at any time, even though interest penalties will usually be applied for early withdrawals.

Alternatively, if it can be committed for, say, three years, then a taxable fixed-term savings account may make sense as they're paying more than the equivalent ISAs (albeit stricter on access). Al Rayan's 2.42% three-year fix outperforms the best 3-year ISA (1.72%) by some distance....

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
https://www.moneysavingexpert.com/savings/best-cash-isa/

Thanks for the tips. If I understand right, moving to a fixed 3 year ISA is best if it's not 100% certain that money will be used for the move. If it's definitely going to be used, then take it out the isa and go for a taxable fixed savings account?

eskbanker

akira181 wrote: »

Mainly because it was her money to begin with and as a widowed parent bring up 2 young children as a chef, it must have been difficult for her to put that much away. My mother is now retired with minimal savings and my mortgage is less than a year old, so I'm assuming getting another mortgage to make up for that worst case 80k shortfall will be difficult. I'm thinking every penny will help and if I can use that 10K to move her closer to me, she'll be happier and therefore money well spent.

Not really what you're asking about I know, but if you have a sibling who'd be entitled to half of the property in your mother's will then you'd be best to have legal paperwork drawn up to protect your £10K investment in the property, otherwise you'd effectively only get £5K back, although perhaps your sibling also has a £10K ISA?

akira181 wrote: »

Thanks for the tips. If I understand right, moving to a fixed 3 year ISA is best if it's not 100% certain that money will be used for the move. If it's definitely going to be used, then take it out the isa and go for a taxable fixed savings account?

To be honest the best thing would be to try to work out when the money would be likely to be needed, as keeping your options open costs money. So, for example, if it was likely to be needed in, say, 2022, then a two-year fix (outside ISA), followed by keeping it in an easy access account, would return significantly more than having it in a 3-year ISA and having to pay a withdrawal penalty.

akira181

Whatever my mother saved for my sister, she will have spent by now. My sister has a habit of spending first, responsibilities second, and calling bank of mum/brother third for a "loan" that she has no intention of paying back when the CC bill is overdue. So good advice, that thought didn't occur to me.

I'm probably misunderstanding the point of an ISA here but what if I withdrew the 10k and put it into a savings account outside ISA in my mothers name? She has minimal savings (less than 5k) and is retired so any interest would be below the taxable income and probably won't affect any tax credits she gets? (The latter I would have to check, not sure if she does get anything beyond a crappy state pension and Warm Home Discount)

eskbanker

akira181 wrote: »

I'm probably misunderstanding the point of an ISA here but what if I withdrew the 10k and put it into a savings account outside ISA in my mothers name? She has minimal savings (less than 5k) and is retired so any interest would be below the taxable income and probably won't affect any tax credits she gets? (The latter I would have to check, not sure if she does get anything beyond a crappy state pension and Warm Home Discount)

An ISA will shelter money from income tax on interest, but since 2016 the Personal Savings Allowance means that basic rate taxpayers earning less than £1,000 per year in savings interest won't pay interest on it, thereby eliminating the main reason people used cash ISAs....

Other tax reliefs may also apply to low earners, such as the starting savings rate, so chances are that there are no benefits to her using a cash ISA versus a notionally taxable account....

badger09

OP

I'm confused by your posts. You say you have a very old ISA that your mother set up when you were a child, which she then forgot about 'sometime in the last 20 years'.

JISAs have only been around for 8 years, so this ISA must be in your mother's name. In which case, SHE must either transfer it to another ISA provider, or move it to a non ISA account.

Are you sure this wasn't done 'sometime in the last 20 years'?

What do you actually have in relation to this ISA account?

akira181

badger09 wrote: »

OP

I'm confused by your posts. You say you have a very old ISA that your mother set up when you were a child, which she then forgot about 'sometime in the last 20 years'.

JISAs have only been around for 8 years, so this ISA must be in your mother's name. In which case, SHE must either transfer it to another ISA provider, or move it to a non ISA account.

Are you sure this wasn't done 'sometime in the last 20 years'?

What do you actually have in relation to this ISA account?

This just got a little more confusing. All I can remember is that it's with Britannia and it's old enough that I have one of those little savings books with your transactions printed in it.

Now that I actually need the paperwork, I can't find it. I've definitely stuck it in an envelope and put it somewhere safe. 99% sure my name is on that too but will be sure once I find the book, I'll have a proper rummage this weekend and post back.

IanSt

akira181 wrote: »

This just got a little more confusing. All I can remember is that it's with Britannia and it's old enough that I have one of those little savings books with your transactions printed in it.

Now that I actually need the paperwork, I can't find it. I've definitely stuck it in an envelope and put it somewhere safe. 99% sure my name is on that too but will be sure once I find the book, I'll have a proper rummage this weekend and post back.

Have you actually taken it into a branch to make sure that there is money in the account?

This would not be the first time that a forgotten transaction book has been found where it seems that there is an account with money in it (sometimes a lot of money), but when they look into it then they find that the money was actually transferred out a long time ago and the person who did it has completely forgotten about it.

Hopefully the money will all be there, but transaction books were not always updated when the money was transferred out, so don't make plans on what to do with any money until it's confirmed that there is money.

badger09

IanSt wrote: »

Have you actually taken it into a branch to make sure that there is money in the account?

OP doesn't even have the passbook at the moment:cool:

akira181 wrote: »

This just got a little more confusing. All I can remember is that it's with Britannia and it's old enough that I have one of those little savings books with your transactions printed in it.

Now that I actually need the paperwork, I can't find it. I've definitely stuck it in an envelope and put it somewhere safe. 99% sure my name is on that too but will be sure once I find the book, I'll have a proper rummage this weekend and post back.

akira181

Found it. It's a savings account opened in my name in 95. Last updated in 2007. I'll go in and get it updated again, positive I haven't touched it.

Since it's not an ISA, kinda makes my original question a little easier. Just need to figure out how long of a fix to go for