Ditch the ISA for NSI

colsten

tcallaghan93 said:

bfc_wurz said:

tcallaghan93 said:

bfc_wurz said:

Hi all,
I already have the maximum savings I can in the new NS&I 1.16% bonds which comes in at just under £1000 a year tax free interest. 

However Im lucky enough to have more savings than that (90k) sat in an ISA currently only giving me 0.5% (and this was a new one I opened this year so I don't have the option of opening another one).

My logic tells me that I would be better off taking all my money out of the ISA and sticking it in NS&I where I would still make more interest even after the tax deductions on my interest over the £1000 allowance. However I do appreciate that if I take it out I can only load it back into an ISA at 20k a year and the NS&I could change.

Has anyone else considered this and the pro's and cons??

Regards
C

/
...you can have a £1 million of NS&I Income Bonds (https://www.nsandi.com/income-bonds), and 1.16% of a million is £11,600.

Hi, I know that. Im talking about avoiding paying tax on interest, which you do after the first £1000 interest, do you follow?

/
Oh haha sorry my bad.
So your choices are:
1. Keep it tax free in an ISA
2. Between you and your partner buy £90k NS&I premium bonds, all "interest" or prizes are tax-free
3. Buy £90k income bonds for the guaranteed interest and take the tax hit.
4. If you already have that much cash, why not transfer the cash ISA to a stocks & shares ISA?

Interest on the NS&I Income Bonds is variable, i.e. not guaranteed.

colsten

Cynergy Bank have a 0.90% variable instant access ISA, accepting transfers in. Still not quite as good as the taxable 1.16% (assuming you are a BR taxpayer) but it retains your ISA wrapper.

But do you really need £90K plus your Income Bonds in ready cash?

83705628

colsten said:

tcallaghan93 said:

bfc_wurz said:

tcallaghan93 said:

bfc_wurz said:

Hi all,
I already have the maximum savings I can in the new NS&I 1.16% bonds which comes in at just under £1000 a year tax free interest. 

However Im lucky enough to have more savings than that (90k) sat in an ISA currently only giving me 0.5% (and this was a new one I opened this year so I don't have the option of opening another one).

My logic tells me that I would be better off taking all my money out of the ISA and sticking it in NS&I where I would still make more interest even after the tax deductions on my interest over the £1000 allowance. However I do appreciate that if I take it out I can only load it back into an ISA at 20k a year and the NS&I could change.

Has anyone else considered this and the pro's and cons??

Regards
C

/
...you can have a £1 million of NS&I Income Bonds (https://www.nsandi.com/income-bonds), and 1.16% of a million is £11,600.

Hi, I know that. Im talking about avoiding paying tax on interest, which you do after the first £1000 interest, do you follow?

/
Oh haha sorry my bad.
So your choices are:
1. Keep it tax free in an ISA
2. Between you and your partner buy £90k NS&I premium bonds, all "interest" or prizes are tax-free
3. Buy £90k income bonds for the guaranteed interest and take the tax hit.
4. If you already have that much cash, why not transfer the cash ISA to a stocks & shares ISA?

Interest on the NS&I Income Bonds is variable, i.e. not guaranteed.

/
Sorry I meant that as opposed to the lottery system with Premium Bonds, you know what rate you're going to get until they decide to change it. My bad

d2446679

Sorry, I mis-read your post originally and so have deleted my first comment.

Personally I would try to keep that £90k in the ISA "wrapper" if possible since it's likely that the interest rates will go up eventually in the future; yes you could "feed back" 20k in each of a few tax years but there's still opportunity cost in that you then couldn't feed in 20k of "new" money (if you'd already used up that year's allowance). And if/when they do, the "personal savings allowance" of £1000/£500 will likely not scale up accordingly (I don't have any inside info on this, but I know how government schemes have tended to work over the last 20 years that I've been working and investing!)

[I've "advised" my partner who was looking to start putting money into savings into the NS&I ISA (currently 0.9%) rather than income bonds (currently 1.15%), even though he would make more money this tax year (< £1000 interest so tax free) with income bonds, due to the longer term preservation of that tax free status.]

Do you have any inclination to take more risk in order to get more of a return? In a stocks and shares or innovative finance (peer-to-peer lending) ISA for example? I should say that you can lose money with any investment; you could even lose all your money although that is pretty unlikely if you invest sensibly!

If so, that could be another option, in addition to the ones that have been suggested. (You can transfer past years' ISA allowances into different types of ISA, so for example a cash ISA into a S&S ISA.... You just need to check that the provider accepts "transfers in" as many do, but some don't.)

Personally my ISA allowance (for all tax years) is invested currently about 60% in cash, 20% in stocks & shares, and 20% in innovative finance (Zopa in my case). I am looking to increase my proportion of the latter two going forward and reduce the amount of cash held.

jjdc

Imo it's likely that the ISA tax free wrapper could be one thing the govt looks at to help pay for the billions spent recently, nice low hanging fruit that won't affect those struggling with finances - they're unlikely to have an isa after all. Wouldn't want to w/d only to find that ISAs to be have yearly limits lowered or even paused to new money.

I've had cash in peer to peer lending, imo it's getting too risky, many platforms are shutting down, eg moneything. Ratesetter might be one option, not invested with them for a few years mind.