Alternative to CASH ISA

masonic

20122013 said:

slinger2 said:

Many variable rate Cash ISAs are not flexible. Many are flexible, so you just need to find out if that's important to you. The Tembo Cash ISA (4.8% variable) which has been getting some publicity recently is not flexible. So although it advertises unlimited withdrawals you can't "replace" that money, adding it back would use up part of your £20k allowance.

Appreciate the clear explanation

I had posted a reply to this thread earlier at 28 March at 10:41PM, as I cannot seem to be able to find PLUM, or Paragon or Tembo (928010) on the FSCS website I was able to finds Vanquis,

https://www.fscs.org.uk/Search/Index/?q=928010

Message : 'No results found, please try again with some other search words.'

Plum and Tembo are aggregators, so they use other banks rather than accepting deposits directly. Plum has some issues and complexity that make it rather unattractive.

The FSCS website has a limited checking service that only considers entities with a banking licence. You can check other firms using https://register.fca.org.uk/s/

They should have Client Money permission for FSCS protection to apply to any funds they hold (while they are not deposited with their partner banks).

Paragon Bank plc can be found here: https://register.fca.org.uk/s/firm?id=001b000000NMWVGAA5 with Accepting Deposits as a granted permission, so it is a FSCS protected bank.

I can also find it on the FSCS website.

20122013

With a 2 Year Fixed Rate Cash ISA: 4.42% AER, interest pay monthly back to this account.

What is the maximum amount to pay into this account to keep within the FSCS protection?

Would  £78000 ? (£77,750 seem to work out just be below £85k)  be the the lump sum deposit ? so at the end of the 2 year including the monthly interest it will just under £85K?

I have use the compound interest calculator L https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

and have inputted various numbers until I get the figure closest to £85K

I want to ask whether the correct number have been entered eg the interest rate is 4.42? or something else and

the compound frequency is 'monthly', I think is correct as it looks the right amount but be would like to know how to calculate or at least know what is the correct number to enter into a calculator.

Looking at the interest in the image below - I think I have not done it correctly, as the interest seem too high.. 

Qyburn

slinger2 said:

Qyburn said:

It needs to go in a new account (sub-account) because the 15 Month Fix doesn't allow deposits after 28 days.

Surely that's not true. It's a flexible ISA and money withdrawn can be replaced in the same ISA in the same tax year. Anyway it's not a "deposit" it's a "replacement".

That is my read of their terms but I expect you could ask them to clarify. In the general blurb about the account they say ..

"This is a Flexible ISA so any funds withdrawn will be added back to your ISA allowance. You then have the option of reinvesting this in another ISA within the same tax year, as long as you don't exceed your annual ISA allowance and subject to HMRC guidelines"

And regarding deposits ..

"Make as many deposits as you like by electronic bank transfer, cheque or by transferring your existing ISAs within 28 days of your application request, up to the maximum balance"

20122013

Qyburn said:

That is my read of their terms but I expect you could ask them to clarify. In the general blurb about the account they say ..

"This is a Flexible ISA so any funds withdrawn will be added back to your ISA allowance. You then have the option of reinvesting this in another ISA within the same tax year, as long as you don't exceed your annual ISA allowance and subject to HMRC guidelines"

And regarding deposits ..

"Make as many deposits as you like by electronic bank transfer, cheque or by transferring your existing ISAs within 28 days of your application request, up to the maximum balance"

Interesting posts, is this the general rule for Flexible ISA ? or it depends on the provider? (as I have found that asking the provider(s) or even written information is not always correct)

masonic

20122013 said:

With a 2 Year Fixed Rate Cash ISA: 4.42% AER, interest pay monthly back to this account.

What is the maximum amount to pay into this account to keep within the FSCS protection?

Would  £78000 ? (£77,750 seem to work out just be below £85k)  be the the lump sum deposit ? so at the end of the 2 year including the monthly interest it will just under £85K?

I have use the compound interest calculator L https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

and have inputted various numbers until I get the figure closest to £85K

The way to calculate this is by converting the AER rate to a decimal multiplier (1.0442) and then using this to work backward from a final balance of £85k.

e.g. 85000 / 1.0442^2 = £77,956

If the account is the Shawbrook 2 year fix, then this is compounded annually (not monthly), which is why the compound interest calculator is over-predicting the interest and under-predicting the maximum balance to keep within £85k over 2 years. If you had an account paying interest monthly, then you should use the gross rate, not AER, because AER already factors in compounding over the course of the year. AER should always be used with annual compound frequency in such a calculator.

20122013

masonic said:

The way to calculate this is by converting the AER rate to a decimal multiplier (1.0442) and then using this to work backward from a final balance of £85k.

e.g. 85000 / 1.0442^2 = £77,956

If the account is the Shawbrook 2 year fix, then this is compounded annually (not monthly), which is why the compound interest calculator is over-predicting the interest and under-predicting the maximum balance to keep within £85k over 2 years. If you had an account paying interest monthly, then you should use the gross rate, not AER, because AER already factors in compounding over the course of the year. AER should always be used with annual compound frequency in such a calculator.

This is very useful, more confident with making choices. 

 

If you don't mind me asking, how can I know which calculation to use, especially if I don't know the calculations ? or the terminology to search online?   I am not sure whether my questions make sense. 

To try and explain what I want to understand more of  mostly is to do with money / investments. Make comparisons so I can make choices.

NB: the account is with Vanquis.

masonic

20122013 said:

masonic said:

The way to calculate this is by converting the AER rate to a decimal multiplier (1.0442) and then using this to work backward from a final balance of £85k.

e.g. 85000 / 1.0442^2 = £77,956

If the account is the Shawbrook 2 year fix, then this is compounded annually (not monthly), which is why the compound interest calculator is over-predicting the interest and under-predicting the maximum balance to keep within £85k over 2 years. If you had an account paying interest monthly, then you should use the gross rate, not AER, because AER already factors in compounding over the course of the year. AER should always be used with annual compound frequency in such a calculator.

This is very useful, more confident with making choices. 

If you don't mind me asking, how can I know which calculation to use, especially if I don't know the calculations ? or the terminology to search online?   I am not sure whether my questions make sense. 

To try and explain what I want to understand more of  mostly is to do with money / investments. Make comparisons so I can make choices.

NB: the account is with Vanquis.

For future planning purposes, it is best to consider both the returns and effect of inflation. For cash savings, a very reasonable assumption is that interest rate = inflation rate and the two cancel out. At times (like now) you'll be able to earn a rate that is higher than inflation, but every now and then, inflation tends to bite back and wipe out these gains. Overall, it is unlikely you'd earn enough to do much more than keep up with inflation, so a £1 saved today at typical interest rates is likely to be worth about £1 in the future. Using this assumption of zero growth after inflation, there is no complex calculation needed

Where it becomes less simple is when considering other investments. These will on average generate returns that are above inflation. On average about 1% above inflation for bonds and about 5% above inflation for equities, but there is a lot of variation, especially in the returns for equities. That is where the following tools can be very useful:

cFireSim: https://www.cfiresim.com/

Portfolio Visualizer: https://www.portfoliovisualizer.com/backtest-portfolio

Portfolio Charts: https://portfoliocharts.com/charts/annual-returns/

These are all USA focused, but can be used as a guide (ignoring currency) to how an investment portfolio would have performed based on historical data, including inflation adjustment and allowing for drawing down from it in retirement. These will allow you to experiment with different allocations and how they affect your probability of your investments lasting as long as you need them to.

Using a simple compound interest calculator when including investments can be dangerous. It was not so long ago that a thread was started by someone who was very overconfident about the returns he could expect from his investments based on an assumption that he'd achieve the historic average return with very little chance of a different outcome if he held his investments for long enough, which is absolutely not true. You'll see the difference between the best and worst outcomes with the above simulation tools is vast.

20122013

masonic said:

' no complex calculation needed '  - I hope not (not for now at least)

For future planning purposes,... 'Overall, it is unlikely you'd earn enough to do much more than keep up with inflation, so a £1 saved today at typical interest rates is likely to be worth about £1 in the future.'.

So as long as my saving rates cancels out inflation then I will have enough for the future?  or if for some reason the saving rates no longer beats inflation then I need to take risks and start investing. As the rates are around 4.5% so maybe better for me to keep saving as less risks.

when considering other investments.....  That is where the following tools can be very useful:

cFireSim: https://www.cfiresim.com/  

for the 'retirement year'  and 'retirement year end' box (should I put the current year 2025? ? As I have stopped working but not take any pension or something else?  as https://www.cfiresim.com/tutorials/   I think I need to put the year I start taking my pension (which will be 2 years spending money. interesting - I have entered the numbers and the result was :

'100.00% - Failed 0 of 99 total cycles.'

Portfolio Visualizer: https://www.portfoliovisualizer.com/backtest-portfolio

does this work with only ETFs?  as I cannot add my tracker to it?

Portfolio Charts: https://portfoliocharts.com/charts/annual-returns/

I will look at this one more later as some reading to enjoy..

... 'these will allow you to experiment with different allocations and how they affect your probability of your investments lasting as long as you need them to.'

This is brilliant - as I was trying to use chart tool but still working out how to use it (as I was hoping to see which funds I wan to keep.. and decided to do the opposite low cost and a streamlined portfolio.

Using a simple compound interest calculator when including investments can be dangerous.

Appreciate this, at least I have some time to correct what my previous funds performance now need to work on my pension

masonic

For the 'retirement year', you should use the year you will start spending from the portfolio. You can also add the state pension in the 'social security' section.

For portfoliovisualizer, just select the closest equivalent US ETF to the funds you hold. If you are using trackers, then they will be almost identical.

20122013

masonic said:

For the 'retirement year', you should use the year you will start spending from the portfolio. You can also add the state pension in the 'social security' section.

For portfoliovisualizer, just select the closest equivalent US ETF to the funds you hold. If you are using trackers, then they will be almost identical.

if I use all the income / dividend each year from my invested equities / year and leave the capital invested. Will the capital beat the inflation (I don't think so as no funds as left / added for it grow) ? I am trying to work out how to balance not to have to take higher risk but also get the amount of money I need to cover the years I need.