Alternative to CASH ISA

20122013

masonic To increase my total asset (in the time frame I have), I think index funds will be my best option for me and hope to get the 5% average return after inflation. I was looking at some other asset allocation portfolio but they all contains some ETFs (no FSCS)_so limited choice, back to index funds. It is difficult to invest when I am not understand it well. This sounds mad as my current fees are averaged out to 0.89% + platform )

so I will start switching my current funds today to HSBC index and it will take two months to transfer to another platform maybe longer.  I can have some time to understand the termiology and calculations etc. 

and look at my other assets

poseidon1

20122013 said:

I hope this is the right board - please feel free to move it.

I have 1 year cash in a current account and will also keep £20K back for 2025/26 cash ISA (open to other options).

 

All the rest of my spending / expenses are in my fixed cash ISAs (4.5%) which will be ending from April 2025. I am thinking of whether there are other ways that can do better than these CASH ISA rates :

Nationwide has a 2 year fixed at  4.15% and a one year fixed at 4.10% with no early withdraw, Coventry same rates and no partial withdraw and a penalty of losing 90 days (?) interest.

As this money can be put away for at least one year or more but I must time it right for access from Year 2.

As I am more familiar with saving accounts / ISA (tax free and guarantee interest), is there  something else I can do with my money so they can work better for me which can be locked away for 1- 2 years ? 

This 15 month 4.40% fixed rate offering from Paragon Bank might appeal, could be considered a 'sweet spot' between your 1 to 2 year saving horizon - see link below

https://www.paragonbank.co.uk/savings/cash-isas/fifteen-month-fixed-cash-isa

Interest can be paid monthly, and since it is a flexible ISA you can repay the interest paid out within the year, if you like the idea of ' having your cake and eating it'. 

slinger2

I've been looking at the Paragon ISA mentioned. 28 days to pay in. Not sure the flexible aspect is much use, there's a hefty penalty for withdrawals. 

20122013

is there any reason why some people choose for bond/ gilts /mmf when the rates are not guarantee (aware it may save time on chasing bank interest rates) etc or is it to with beating inflation rather than getting a savings rate of  4.1%?

eskbanker

20122013 said:

is there any reason why some people choose for bond/ gilts /mmf when the rates are not guarantee (aware it may save time on chasing bank interest rates) etc or is it to with beating inflation rather than getting a savings rate of  4.1%?

People do use variable rate savings accounts too - fixed rate products aren't automatically the best!

poseidon1

slinger2 said:

I've been looking at the Paragon ISA mentioned. 28 days to pay in. Not sure the flexible aspect is much use, there's a hefty penalty for withdrawals. 

Monthly interest payments do not count as withdrawals ( I checked). It is the interest withdrawn that I would be putting back.

As matter of principle I never withdraw capital from any isa ( tax free income far too valuable for 40% tax payer).

slinger2

poseidon1 said:

slinger2 said:

I've been looking at the Paragon ISA mentioned. 28 days to pay in. Not sure the flexible aspect is much use, there's a hefty penalty for withdrawals. 

Monthly interest payments do not count as withdrawals ( I checked). It is the interest withdrawn that I would be putting back.

As matter of principle I never withdraw capital from any isa ( tax free income far too valuable for 40% tax payer).

I'm confused. Are you saying that if the interest is paid away the it doesn't count as a withdrawal, but if it's added to the account and then taken out, it does count as a withdrawal?

Anyway my principle is not to take anything out of an isa that I can't replace later in the tax year. Whether it's capital or interest is completely irrelevant. 

poseidon1

slinger2 said:

poseidon1 said:

slinger2 said:

I've been looking at the Paragon ISA mentioned. 28 days to pay in. Not sure the flexible aspect is much use, there's a hefty penalty for withdrawals. 

Monthly interest payments do not count as withdrawals ( I checked). It is the interest withdrawn that I would be putting back.

As matter of principle I never withdraw capital from any isa ( tax free income far too valuable for 40% tax payer).

I'm confused. Are you saying that if the interest is paid away the it doesn't count as a withdrawal, but if it's added to the account and then taken out, it does count as a withdrawal?

Anyway my principle is not to take anything out of an isa that I can't replace later in the tax year. Whether it's capital or interest is completely irrelevant. 

Precisely, there is no penalty where you set up the isa on the  basis of automatic mandating of interest to your personal bank account ( all my isas set up this way after I retired ) - I live off my  isa income,  whether it be  interest or stocks & shares dividends.

However since I am in the fortunate position of being able to regularly utilise the full annual £20k  allowance,  being able to replace all the isa income spent during the year , gives me that bit extra at the start of the new isa year, over and above the allowance.  I consider it a form of virtuous recycling that works for me but appreciate it may not make sense to others.

slinger2

poseidon1 said:

slinger2 said:

poseidon1 said:

slinger2 said:

I've been looking at the Paragon ISA mentioned. 28 days to pay in. Not sure the flexible aspect is much use, there's a hefty penalty for withdrawals. 

Monthly interest payments do not count as withdrawals ( I checked). It is the interest withdrawn that I would be putting back.

As matter of principle I never withdraw capital from any isa ( tax free income far too valuable for 40% tax payer).

I'm confused. Are you saying that if the interest is paid away the it doesn't count as a withdrawal, but if it's added to the account and then taken out, it does count as a withdrawal?

Anyway my principle is not to take anything out of an isa that I can't replace later in the tax year. Whether it's capital or interest is completely irrelevant. 

Precisely, there is no penalty where you set up the isa on the  basis of automatic mandating of interest to your personal bank account ( all my isas set up this way after I retired ) - I live off my  isa income,  whether it be  interest or stocks & shares dividends.

However since I am in the fortunate position of being able to regularly utilise the full annual £20k  allowance,  being able to replace all the isa income spent during the year , gives me that bit extra at the start of the new isa year, over and above the allowance.  I consider it a form of virtuous recycling that works for me but appreciate it may not make sense to others.

But if the interest that is paid away doesn't count as a withdrawal then you can't "replace" it later in the tax year because it was never withdrawn. With a flexible ISA you can only replace money that has been previously withdrawn, earlier in same tax year. 

masonic

slinger2 said:

poseidon1 said:

slinger2 said:

poseidon1 said:

slinger2 said:

I've been looking at the Paragon ISA mentioned. 28 days to pay in. Not sure the flexible aspect is much use, there's a hefty penalty for withdrawals. 

Monthly interest payments do not count as withdrawals ( I checked). It is the interest withdrawn that I would be putting back.

As matter of principle I never withdraw capital from any isa ( tax free income far too valuable for 40% tax payer).

I'm confused. Are you saying that if the interest is paid away the it doesn't count as a withdrawal, but if it's added to the account and then taken out, it does count as a withdrawal?

Anyway my principle is not to take anything out of an isa that I can't replace later in the tax year. Whether it's capital or interest is completely irrelevant. 

Precisely, there is no penalty where you set up the isa on the  basis of automatic mandating of interest to your personal bank account ( all my isas set up this way after I retired ) - I live off my  isa income,  whether it be  interest or stocks & shares dividends.

However since I am in the fortunate position of being able to regularly utilise the full annual £20k  allowance,  being able to replace all the isa income spent during the year , gives me that bit extra at the start of the new isa year, over and above the allowance.  I consider it a form of virtuous recycling that works for me but appreciate it may not make sense to others.

But if the interest that is paid away doesn't count as a withdrawal then you can't "replace" it later in the tax year because it was never withdrawn. With a flexible ISA you can only replace money that has been previously withdrawn, earlier in same tax year. 

I think this conflates two different sets of rules. A bank, within its T&Cs can treat interest paid away as not being a withdrawal that triggers the penalty they impose. Whereas HMRC can treat it as a withdrawal for the purposes of the flexible ISA rules. A number of ISA managers add paid away interest to the flexible allowance, despite no statement transaction formally crediting it to the account and then withdrawing it. I don't think there is anything to suggest this is wrong.