ISA advice

Smithers37

Band7 said:

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

Well sure, which is why I prequalified with saying personally recognising the fact that every personal circumstance is different  but the OP specifically mentioned they were looking to move because of the rates, which is why I mentioned that the rates are rarely very good.

The interest rates on ISAs have recently improved substantially, similar to what they have done on non-ISA accounts. Of course some existing ISA accounts are in the doldrums, just like with non-ISA accounts. Though even before the recent rate increases, cash ISAs were a viable option for the emergency funds of HR tax payers, and that's even more true now. In addition, cash ISAs have become viable again even for BR tax payers and/or for people who bust their PSA, either in the current tax year or in the near future. If there is any rule, it's that people should regularly assess whether there are any offerings which would suit their particular circumstances. It certainly isn't the case that cash ISAs aren't worth it as a rule.

Interest rates have improved as inflation has soared, but you’re far worse off stashing money in a cash Isa now than when all you could get was a fraction of a percent. No point earning 6% interest when your money is losing 14% in value, so I don’t agree that it’s a viable option more than ever. There might be a use for a cash ISA but a ROI is not one of them which is my point, the value of the money is rotting away. You’re talking about an exception to the rule.

masonic

Smithers37 said:

Band7 said:

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

Well sure, which is why I prequalified with saying personally recognising the fact that every personal circumstance is different  but the OP specifically mentioned they were looking to move because of the rates, which is why I mentioned that the rates are rarely very good.

The interest rates on ISAs have recently improved substantially, similar to what they have done on non-ISA accounts. Of course some existing ISA accounts are in the doldrums, just like with non-ISA accounts. Though even before the recent rate increases, cash ISAs were a viable option for the emergency funds of HR tax payers, and that's even more true now. In addition, cash ISAs have become viable again even for BR tax payers and/or for people who bust their PSA, either in the current tax year or in the near future. If there is any rule, it's that people should regularly assess whether there are any offerings which would suit their particular circumstances. It certainly isn't the case that cash ISAs aren't worth it as a rule.

Interest rates have improved as inflation has soared, but you’re far worse off stashing money in a cash Isa now than when all you could get was a fraction of a percent. No point earning 6% interest when your money is losing 14% in value, so I don’t agree that it’s a viable option more than ever. There might be a use for a cash ISA but a ROI is not one of them which is my point, the value of the money is rotting away. You’re talking about an exception to the rule.

But what's the alternative? Broadly, all asset classes have lost money in real terms over the past 12 months, with cash outperforming equities and bonds. In times of high inflation, minimising that erosion of value is a worthwhile exercise. If you can take a long term view, then of course there are investments that can outpace inflation fairly reliably over long holding periods.

wyutani

Band7 said:

wyutani said:

 At approx. 4% APR for a 1 yr fix I think it is a good option for a risk averse HR tax payer.

Agreed, excellent deal, as it is the equivalent of 6.6% in a non-ISA. Even BR tax payers would need a 5% non-ISA account to match a 4% ISA.

Any reason why you don't go for the 4.25% Virgin ISA, btw? You'll need to have a current account with them to get access to it, but you don't have to use that current account if it doesn't offer you anything else of value.

TBH I didn't even consider doing that! Next time I will work the options even harder, every 0.1 % counts

Band7

Smithers37 said:

Band7 said:

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

Well sure, which is why I prequalified with saying personally recognising the fact that every personal circumstance is different  but the OP specifically mentioned they were looking to move because of the rates, which is why I mentioned that the rates are rarely very good.

The interest rates on ISAs have recently improved substantially, similar to what they have done on non-ISA accounts. Of course some existing ISA accounts are in the doldrums, just like with non-ISA accounts. Though even before the recent rate increases, cash ISAs were a viable option for the emergency funds of HR tax payers, and that's even more true now. In addition, cash ISAs have become viable again even for BR tax payers and/or for people who bust their PSA, either in the current tax year or in the near future. If there is any rule, it's that people should regularly assess whether there are any offerings which would suit their particular circumstances. It certainly isn't the case that cash ISAs aren't worth it as a rule.

Interest rates have improved as inflation has soared, but you’re far worse off stashing money in a cash Isa now than when all you could get was a fraction of a percent. No point earning 6% interest when your money is losing 14% in value, so I don’t agree that it’s a viable option more than ever. There might be a use for a cash ISA but a ROI is not one of them which is my point, the value of the money is rotting away. You’re talking about an exception to the rule.

What you are describing applies to all cash (and probably other assets, too). The basic fact is, though, that by using an ISA many people can lose less money since they don't have to pay 20 or 30% tax on the interest. You can continue to disagree with this but you can't alter basic maths.

cricidmuslibale

Band7 said:

Smithers37 said:

Band7 said:

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

Well sure, which is why I prequalified with saying personally recognising the fact that every personal circumstance is different  but the OP specifically mentioned they were looking to move because of the rates, which is why I mentioned that the rates are rarely very good.

The interest rates on ISAs have recently improved substantially, similar to what they have done on non-ISA accounts. Of course some existing ISA accounts are in the doldrums, just like with non-ISA accounts. Though even before the recent rate increases, cash ISAs were a viable option for the emergency funds of HR tax payers, and that's even more true now. In addition, cash ISAs have become viable again even for BR tax payers and/or for people who bust their PSA, either in the current tax year or in the near future. If there is any rule, it's that people should regularly assess whether there are any offerings which would suit their particular circumstances. It certainly isn't the case that cash ISAs aren't worth it as a rule.

Interest rates have improved as inflation has soared, but you’re far worse off stashing money in a cash Isa now than when all you could get was a fraction of a percent. No point earning 6% interest when your money is losing 14% in value, so I don’t agree that it’s a viable option more than ever. There might be a use for a cash ISA but a ROI is not one of them which is my point, the value of the money is rotting away. You’re talking about an exception to the rule.

What you are describing applies to all cash (and probably other assets, too). The basic fact is, though, that by using an ISA many people can lose less money since they don't have to pay 20 or 30% tax on the interest. You can continue to disagree with this but you can't alter basic maths.

Minor point but shouldn’t it be 20 or 40% tax on the interest or have I misunderstood something here?

Smithers37

Band7 said:

Smithers37 said:

Band7 said:

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

Well sure, which is why I prequalified with saying personally recognising the fact that every personal circumstance is different  but the OP specifically mentioned they were looking to move because of the rates, which is why I mentioned that the rates are rarely very good.

The interest rates on ISAs have recently improved substantially, similar to what they have done on non-ISA accounts. Of course some existing ISA accounts are in the doldrums, just like with non-ISA accounts. Though even before the recent rate increases, cash ISAs were a viable option for the emergency funds of HR tax payers, and that's even more true now. In addition, cash ISAs have become viable again even for BR tax payers and/or for people who bust their PSA, either in the current tax year or in the near future. If there is any rule, it's that people should regularly assess whether there are any offerings which would suit their particular circumstances. It certainly isn't the case that cash ISAs aren't worth it as a rule.

Interest rates have improved as inflation has soared, but you’re far worse off stashing money in a cash Isa now than when all you could get was a fraction of a percent. No point earning 6% interest when your money is losing 14% in value, so I don’t agree that it’s a viable option more than ever. There might be a use for a cash ISA but a ROI is not one of them which is my point, the value of the money is rotting away. You’re talking about an exception to the rule.

What you are describing applies to all cash (and probably other assets, too). The basic fact is, though, that by using an ISA many people can lose less money since they don't have to pay 20 or 30% tax on the interest. You can continue to disagree with this but you can't alter basic maths.

Not sure if you’re just trolling at this point or you’re not reading correctly. I’ve said twice now that there are circumstances where a cash ISA might be useful, but in no circumstances does a Cash ISA provide a decent return on investment which is my point. It does not matter how the tax is sheltered if the rate of return is poor in the first place.

jimjames

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

 move because of the rates, which is why I mentioned that the rates are rarely very good.

That's just not true anymore. Virgin is paying 3% for instant access ISA

Smithers37

jimjames said:

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

 move because of the rates, which is why I mentioned that the rates are rarely very good.

That's just not true anymore. Virgin is paying 3% for instant access ISA

But inflation is currently at around 10%. You’re losing around 7% by keeping cash at 3%. You were better off with a 0.1% rate when inflation was at 2.5%. 

Albermarle

Smithers37 said:

jimjames said:

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

 move because of the rates, which is why I mentioned that the rates are rarely very good.

That's just not true anymore. Virgin is paying 3% for instant access ISA

But inflation is currently at around 10%. You’re losing around 7% by keeping cash at 3%. You were better off with a 0.1% rate when inflation was at 2.5%. 

You would have been a lot better off with money in a cash ISA than investments last year, where most people saw a real drop in value around 20% ( 30% in some cases )  , which is a lot worse than 7% .
Of course in the long term the situation should reverse ( we all hope !)

Ocelot

Smithers37 said:

jimjames said:

Smithers37 said:

Band7 said:

Smithers37 said:

I personally stay away from cash ISAs, the rates aren’t worth it as a rule.

Cash ISAs my not be worth it for yourself but there is no rule to say they aren't worth it for everyone else, too. For HR tax payers, they can be a no-brainer for keeping their emergency cash float in, for instance. 

 move because of the rates, which is why I mentioned that the rates are rarely very good.

That's just not true anymore. Virgin is paying 3% for instant access ISA

But inflation is currently at around 10%. You’re losing around 7% by keeping cash at 3%. You were better off with a 0.1% rate when inflation was at 2.5%. 

That's why many of us are taking out longer term ISAs, hoping that the rate may beat inflation in a year or two. If rates were to significantly increase during that time, they can be transferred out (albeit with a stiff penalty).

Whether you are better off also depends on how much interest you are receiving. If your increase in outgoings after 10% inflation makes you £4000 pa worse off, but the (smaller) increase in rates make you £5000 pa better off, arguably you are better off.

Also, it depends on whether the items included in the CPI basket are relevant to you. Everyone has their own personal inflation rate.

However, I will concede that the overall perceived value of money will be less (10k will seem like 9k to most people a year later).

I reiterate that other investment and savings classes aren't generally keeping up with inflation either, unless you are a very lucky or skilled investor, and are young enough to invest over a long time frame.