ISA or fixed rate for a year

paulboy83

I've got just over £1000 saved towards next years ISA allowance, with the apparently impending drop in interest rates would it be wise to put my money into a fixed rate bond for a year, then put it in my isa just before the end of next tax year when the account matures. Or should I just wait for the new isa year and put it straight in there for the tax free interest?

I suspect its just going to be a game of chance but can anyone enlighten me?

Stavros_3

Tax free every time, use your allowance. I always use my allowance then everything else is dumped into the best fixed rate bond I can find

SirSaveALot_2

paulboy83 wrote: »

I've got just over £1000 saved towards next years ISA allowance, with the apparently impending drop in interest rates would it be wise to put my money into a fixed rate bond for a year, then put it in my isa just before the end of next tax year when the account matures. Or should I just wait for the new isa year and put it straight in there for the tax free interest?

I suspect its just going to be a game of chance but can anyone enlighten me?

Hi

There are fixed rate ISAs available, such as 6.3% for 1 year from Halifax (IIRC). So if you decide a fixed rate is best, I'd do that rather than keeping it outside of an ISA.

Remember fixed rate normally means tying up the money for the duration of the term, so is that going to be acceptable?

As to fixed or variable being best, it's a judgement call. I'm mulling it over at the minute but haven't reached a conclusion. If in doubt, I'll go for the flexibility of a normal Cash ISA account.

Hope this helps
SirSaveALot

manic_saver

Not being skeptical, but i can see interest rates been cut atleast twice this year.

So my money will be on a fixed isa, the one that Sirsavealot mentioned. I know i won't be withdrawing any money over the next year so thats why i'll be picking the fixed as i can see variable isas being affected.

This is my opinion but i can see tough times ahead for savers a-like.

Mikeyorks

SirSaveALot wrote: »

Hi

There are fixed rate ISAs available, such as 6.3% for 1 year from Halifax (IIRC).

Minimum £3k to do that one .... and the way Halifax have reduced rates over the last week ... right across their accounts ... it's on the cards 6.3% won't still be there by the time the OP can put more money in an ISA.

Mikeyorks

paulboy83 wrote: »

I suspect its just going to be a game of chance but can anyone enlighten me?

At the moment 1 year fixed rates are holding up reasonably well. You need to decide whether they will continue to do so in the face of an almost certain base cut next month. And balance that against the rate you're getting from your ISA (allied to whether you pay tax?).
Personally (as the last few months) I'd be taking the 'bird in the hand' approach and going for the best fixed rate immediately. Would have suggested the Halifax 6 month fixed at 6.8% as hedging your bets - but they've just pulled the rate down over 1% from mid-night! Lots of rate changes in the past week ... and none are up.

In all of this - I'm assuming you've fully contributed your ISA 07-08. Otherwise you wouldn't be asking about the £1k!

Hungerdunger

It's really down to you making an informed guess as to what rate of interest might be available on 6th April. Then multiply that figure by 1.25 and that's the interest rate you would need to achieve by investing now in non-ISA savings just to break even.

So if you think the best you'll get in April is 5%, you'd need to do better than 6.25% to make it worthwhile.

paulboy83

Thanks for the replies, i'm gonna have to go away and really look hard at what I can get, as I do think that my ISA rate will drop and am not that confident about finding one that is a great deal better.... If only my crystal ball still worked!

Savings_Dave

I've been having the same musings - I've been doing things a little backwards mind the past year. I already have an NS&I Cash Mini ISA and maxed it out first day of the current tax year - I can afford to do this again on 6th April 2008 with the new £3,600 limit.

Since last April I put all my excess into ING Direct (bad move as they didn't pass on savings). After a bit of reading on here I then moved excess to A&L Direct Saver...but now with possible IR drops likely I've finally decided to open a regular 'fixed rate' monthly saver for a year with Lloyds TSB (8% AER / 6.4% Net) - by this time next year I'd have more than the £3,600 needed for my Cash ISA allowance for the 2009/2010 tax year.

I should've done this sooner (my second port of call) and read Martin's advice and the forum discussions regarding regular savers.

I missed out on the A&L fixed rate bond at 7% but I'm happy to squirrel away £250 a month with Lloyds now.

bristolleedsfan

paulboy83 wrote: »

Thanks for the replies, i'm gonna have to go away and really look hard at what I can get, as I do think that my ISA rate will drop and am not that confident about finding one that is a great deal better.... If only my crystal ball still worked!

No gamble now,;) 6.90% fixed for a year and u can withdraw instant access penalty free should u decide their is a ISA deal worth moving into come april.


http://www.northernrock.co.uk/savings/fixed-rate-access-bonds/

Cozworth806

I would say that if you are a 20% tax payer then the amounts will likely be close, but if you are close to higher rate then stick it an ICICI account for 2 months and then go for an ISA, and if you're lucky you may find a FR ISA at that.