Are ISA's really worth it.

XPected

Several banks appear to be offering better interest rates, even with instant access, than the best ISA rate I can find.  So it seems to me unless you have a 5 year fixed ISA, the returns on banked savings after tax, even if you're a higher rate tax payer, work out better than ISA returns. Am I wrong?

dunstonh

It is fair to say that the ISA wrapper is currently better suited towards S&S than cash.   Ever since the personal savings allowance was introduced, it reduced the benefits of as cash ISA for most people.  

eskbanker

When the PSA was introduced in 2016, MSE published a piece about whether cash ISAs are still worth it, at https://blog.moneysavingexpert.com/2016/02/is-it-time-to-ditch-cash-isas-now-that-all-savings-will-be-tax-free/

Most of the points there have now made it into their cash ISA summary, at https://www.moneysavingexpert.com/savings/best-cash-isa/#tip1

Albermarle

XPected said:

Several banks appear to be offering better interest rates, even with instant access, than the best ISA rate I can find.  So it seems to me unless you have a 5 year fixed ISA, the returns on banked savings after tax, even if you're a higher rate tax payer, work out better than ISA returns. Am I wrong?

Even if you are a higher rate taxpayer , you can still earn £500 pa tax free interest . So if you are below that level then better not to have an ISA. 
If you are earning more than £500 , then a good comparison is that today you can get a 2 year fixed rate from Paragon 
1.3% for non Isa - taxed at 40% = 0.78%
0.9% for Isa 
Also if interest rates rise having the tax shelter may be more beneficial.

Gadfium

Cash ISA? Not worth it.

S&S ISA? Yes, absolutely worth it.

XPected

Gadfium said:

Cash ISA? Not worth it.

S&S ISA? Yes, absolutely worth it.

So Gadfium what has been the approx return on S&S ISA's in recent times please?

AlanP_2

XPected said:

Gadfium said:

Cash ISA? Not worth it.

S&S ISA? Yes, absolutely worth it.

So Gadfium what has been the approx return on S&S ISA's in recent times please?

S&S ISAs do not produce returns, the investments held within the ISA wrapper produce the returns so there isn't a simple answer to your question.

Gadfium

XPected said:

Gadfium said:

Cash ISA? Not worth it.

S&S ISA? Yes, absolutely worth it.

So Gadfium what has been the approx return on S&S ISA's in recent times please?

How long is your piece of string* compared to someone elses? A S&S ISA is nothing more than a wrapper within which you can place all sorts of different investment products. The returns will vary depending on the type and mix.

Why they are worth it is because anything inside the S&S ISA is free from income and Capital Gains Tax. To give an extreme example, you cloud pay a single share for £1 in your ISA. Tomorrow that share is worth £1 million. You could withdraw it completely free of CGT or income tax.

https://www.which.co.uk/money/investing/stocks-and-shares-isas/what-is-a-stocks-and-shares-isa-al4902u4yqgg

*Not a euphemism!

pip895

XPected said:

Gadfium said:

Cash ISA? Not worth it.

S&S ISA? Yes, absolutely worth it.

So Gadfium what has been the approx return on S&S ISA's in recent times please?

About 20% up in 6 months if you were in a global tracker or over 60% up in SMT (Scottish Mortgage Investment trust)!  Over the year it is a little less impressive at just 5% ish for the tracker but still a lot better than cash!

Albermarle

XPected said:

Gadfium said:

Cash ISA? Not worth it.

S&S ISA? Yes, absolutely worth it.

So Gadfium what has been the approx return on S&S ISA's in recent times please?

Gadfium said:

XPected said:

Gadfium said:

Cash ISA? Not worth it.

S&S ISA? Yes, absolutely worth it.

So Gadfium what has been the approx return on S&S ISA's in recent times please?

How long is your piece of string* compared to someone elses? A S&S ISA is nothing more than a wrapper within which you can place all sorts of different investment products. The returns will vary depending on the type and mix.

Why they are worth it is because anything inside the S&S ISA is free from income and Capital Gains Tax. To give an extreme example, you cloud pay a single share for £1 in your ISA. Tomorrow that share is worth £1 million. You could withdraw it completely free of CGT or income tax.

https://www.which.co.uk/money/investing/stocks-and-shares-isas/what-is-a-stocks-and-shares-isa-al4902u4yqgg

*Not a euphemism!

Or your £1 could be worth zero …..

Albermarle

XPected said:

Gadfium said:

Cash ISA? Not worth it.

S&S ISA? Yes, absolutely worth it.

So Gadfium what has been the approx return on S&S ISA's in recent times please?

I think the historical average for investing 100% in global shares is around 7% pa but with some stomach churning drops along the way . A more medium risk investment would be around 5% pa . Both figures before inflation and the average is over a very long period.