What's the most cash-like ISA fund?

cloud_dog

The only way I found to actually hold cash in a funds ISA was via the CoFunds route, they have a fund called Cash Reserve.

The interest is not paid gross (as per ISA rules) but it is cash and it does pay interest (assuming its still there).

cloud_dog

munk

Another option if you're with Hargreaves Lansdown (HL) is to switch out a portion of your equities and leave the money in cash importantly still within the ISA until you feel more confident about equities. You get paid interest on the cash, although it's a tiered system so you don't get as much as a high interest savings account... probably around 4% or so but don't quote me on that

How long you can keep this money in cash is not set out clearly and is left to the discretion of the ISA manager afaik. I imagine you'd get a warning after a while, maybe 6 months or so, no idea so not worth speculating. Just another idea anyway.

Another thing I'd say about cash funds though is that you'll never get as much as you would in a high interest savings account due to the management charge. As such it might be better to look at other low volatility funds like bond funds which currently offer decent yields which rival high interest savings accounts right now. Another benefit of this option is that if base rates go down - and it looks as though they will for the next year at least - then bond yields will go up.

Downside of the bond fund route is that your capital is still at risk somewhat.

RayWolfe

And the interest is not tax free.

MrMicawber_2

Oddly I rang the Inland Revenue about this on Friday. They call it a flat rate charge rather than tax and the flat rate is 20% regardless of your tax status. The person I spoke to didn't seem too bothered how long the money was left in cash because the combination of low interest rates and the 20% charge is a pretty good incentive to get back to funds. I guess they would stamp on a rate of interest which looked to high fairly quickly.