Nationwide ISA's

johnB

My wife and I both have ISA's in Nationwide. This is really all our savings. Are we in danger of putting all our eggs into one basket if Nationwide goes 'bust'?
Can we transfer part of our ISA's to a different provider to make sure?
Is there any need to do it?

masonic

You might wish to move to get a better rate. Providing you each hold less than £85k you would be fully compensated should Nationwide fail, so providing you can cope without access for a few days/weeks there would be no need to split.

epm-84

Martin Lewis dealt with a similar question on his Money Show a couple of weeks ago.  His advice was forget about loyalty and unless you expect to earn over £1000 in interest then forget about holding money in cash ISAs and move it to the NS&I account which pay 1.16% interest.

Albermarle

if Nationwide goes 'bust'?

It makes sense for any individual not have more than £85K with anyone bank/building society.

However Nationwide going bust is a pretty remote possibility .

Archi_Bald

epm-84 said:

Martin Lewis dealt with a similar question on his Money Show a couple of weeks ago.  His advice was forget about loyalty and unless you expect to earn over £1000 in interest then forget about holding money in cash ISAs and move it to the NS&I account which pay 1.16% interest.

Whilst it may be the right thing to do for many people, that seems a bit simplistic and people might want to take more than the current year into consideration. They might bust their Personal Savings Allowance*, and there is always the possibility that it might get scrapped again. Depending on how much you have in the ISA, once you have your money out of it, it might take years to get it back in. A lot also depends on when you expect to need your money. If it's a nest egg for the future, putting it into a 1.16% variable instant access account when you can get a 1.41% fixed 2-year ISA wouldn't be the smartest move. If, however, you want to spend it next year, then a 2-year fix would clearly not be appropriate as you would incur a hefty penalty for early withdrawal. Then there are people who would benefit from a LISA, or some might do better to have at least some of their ISA in S&S. 

* £1,000 for BR tax payers, £500 for HR, and £0 for AR

epm-84

Archi_Bald said:

epm-84 said:

Martin Lewis dealt with a similar question on his Money Show a couple of weeks ago.  His advice was forget about loyalty and unless you expect to earn over £1000 in interest then forget about holding money in cash ISAs and move it to the NS&I account which pay 1.16% interest.

Whilst it may be the right thing to do for many people, that seems a bit simplistic and people might want to take more than the current year into consideration. They might bust their Personal Savings Allowance*, and there is always the possibility that it might get scrapped again. 

I agree the personal allowance may get withdrawn or reduced but if you've read ISA T&Cs you'll notice they say the government may choose to withdraw favourable tax treatment of interest on ISAs in the future.  I think at the current time with very low interest rates it's likely the government will face calls to do more to help people saving, opposed to them penalising savers, even though the Chancellor will need to increase tax receipts some how in the near future.

I personally think at the current time it's safe to have £50,000 outside of ISAs.  Interest rates would need to average 2% for a year before you'd exceed the current annual tax free interest allowance.  If the Chancellor did announce changes at the next budget (which wouldn't take effect until 6th April 2021), then you could put £20,000 in to an ISA before the end of this tax year and £20,000 at the start of the 21/22.

margaretx9

In most Nationwide instant access ISAs you would be lucky to earn £1 interest per annum for every £10k invested now. So time to leave NW - but not because it might go bust which is close to zero and the Govt would bail it out anyway via the FSCS scheme.

eskbanker

margaretx9 said:

....but not because it might go bust which is close to zero and the Govt would bail it out anyway via the FSCS scheme.

That's two different scenarios you're mixing up there - if the government chose to bail it out it would use its own money to keep it open, but the industry-funded FSCS would only be involved to compensate depositors if it had already gone under.

epm-84

eskbanker said:

margaretx9 said:

....but not because it might go bust which is close to zero and the Govt would bail it out anyway via the FSCS scheme.

That's two different scenarios you're mixing up there - if the government chose to bail it out it would use its own money to keep it open, but the industry-funded FSCS would only be involved to compensate depositors if it had already gone under.

Yes.  Although, we have no idea what approach the Conservative government might take in response to a bank or building society being on the verge of collapse.  We do know they spent years mocking Labour for how they dealt with banks being on the verge of collapse, especially in the case of RBS.  So would the Conservatives be hypocritical and do the same if they were presented with it or would they avoid doing it, even if it's the best option, to prevent themselves looking hypocritical.  Who knows?

The one thing we do know is the Conservatives do not seem to like bailing out British airlines in financial trouble and would rather let them go bust and contract out rescue flights to various worldwide airlines, then to place the struggling airline under short term state control so the existing aircraft and crews can be used to get stranded holidaymakers home.

uptdale

epm-84 said:

Interest rates would need to average 2% for a year before you'd exceed the current annual tax free interest allowance. 

The calculations change if you are likely to have total taxable income (more accurately "adjusted net income") between £100,000 and £125,000 in the tax year.  If you are in this band, your marginal tax rate on interest within the interest allowance is 20%, and on interest above the £500 interest allowance it is 60%.  So if you might be in this situation, it pays to look at anything which would reduce your taxable income, including using a cash ISA even if your interest income is likely to be less than the interest allowance.

This is all to do with the "phase-out" of your personal allowance in that income bracket.  All interest outside an ISA, even within the interest allowance, counts towards your income for the purpose of the phase-out.

epm-84

Nationwide AGM voting has opened, so for those who had over £100 invested at the end of the last financial year and still have an account open, you have a chance to voice any dissatisfaction.  I notice they have said their CEO has taken a 20% pay cut so he won't get £2.5m remuneration this year.  They also have added questions about whether you approve of the board's remuneration or not but they do say that vote is advisory only.