Regular Saving ISAs?

david72

I'm curious as to why Regular Saving ISAs don't seem to be very much of a thing (there are hardly any providers which offer them, and those few which do exist seem to pay rather lower interest rates than unshielded accounts, so even if you are subject to tax on interest on unshielded accounts, the Regular Saving ISAs which do currently exist are sadly not really worthwhile at present)?

At current savings interest rates, it is increasingly the case that many more people are likely to be subject to tax on interest payments above their PSA limit (unless shielding their savings by using ISAs), so it would seem to be sensible for savings providers to offer regular saving accounts in ISA form as well, so that the interest paid there doesn't count towards overflowing your PSA limit.

In fact, now that we can fund multiple ISAs each tax year, it surely would make sense for all savings providers to offer all savings accounts in the choice of ISA or unshielded form at the same rate of interest for both (subject to ISA contribution limits for the ISA form of course, and the availability of the latter for those who want/need to deposit more than the sum total of their ISA contribution limit). That so many types of savings account exist only in unshielded form means that savings providers end up making some savers pay tax unnecessarily (and not save as tax-efficiently as we can), which is surely antithetical to the purpose of encouraging saving.

masonic

The ISA rules prevent providers from restricting withdrawals, which mainly affects fixed term accounts, but also impacts regular saver ISAs. Until this tax year you were only allowed to subscribe to one cash ISA per tax year, which also made accounts with low deposit limits unattractive. Many providers still haven't caught up with the changes.

Then there is the issue of the additional administrative burden created by using the ISA wrapper, which is less justifiable for low value accounts.

Having said that, Help To Buy ISAs were popular and paid great rates in their day.

I'm not sure this is a genuine problem for the vast majority of people who use regular savers, as the target market is those who don't have much in savings and therefore wouldn't bust their PSA. Just us MSErs

david72

Good point about ISA rules requiring access to your money to be allowed. Having said that, it seems that nowadays it is almost as common that there are many competitive regular saving accounts which do allow a small number of withdrawals each year or for early closure if needed, as there are those which do not allow any access until the end of the term, so hopefully the market would be able to accommodate that requirement quite easily.

I suppose you are right that for every MSEr who has several/many regular saving accounts (looks at feet), there will be at least one person who maybe only has one, if that…

jimjames

david72 said:

I suppose you are right that for every MSEr who has several/many regular saving accounts (looks at feet), there will be at least one person who maybe only has one, if that…

I think many with decent savings will use both regular savers and ISAs. Build up the savings in the regular saver and then pay the balance into ISA at the end of the term. Best of both worlds and makes use of the PSA too.