Cash ISAs? Do me a favour, only for high rate tax payers

debbie42

Not really worth replying to the somewhat obvious trolling, but it did make me smile a bit.
I'm not a tax payer, I invest as much as I can in Cash ISAs and also invest a fair chunk in somewhat risky shares. Oh, and I'm British too, but maybe I'm just deluded or a statistical abnormality?

Cricri

I agree with everyone: it's the best tax free investment, it's very little hassle (2 minutes with online banking a year), and every year, whatever it gives me is most, and the cash is available anytime (albeit I hack a different reserve when the need arises).
If you have £3K+ and let it sleep on a current account, now THAT's nonsense.
*EDIT* let me point out that the ISA was the first savings account I opened, and I didn't wait for Martin's advice to do so! So it's not only a MSE thing

Han_naH

Bah! The negative British people - always turning the forum personal and bitter!

What happened to manners? Never mind eh!

I maintain that even after 10 years, using all of the ISA allowance in a stocks and shares ISA is the best long term result (7K / year), and the figures are much bigger than this silly cash ISA adventure.

As a basic rate payer, my gain with a cash ISA is £30 / year. THREE TENNERS FOLKS. :j

So after 10 years that is £300 or so with compound interest. Crikey, let's buy four new tyres for the car.
Someone mentioned tax free cash ISA for life. Listen, legislation changes, and caps are introduced.

If I have £100K to invest then why on earth would I put 3K aside to chase £30?
What are you people ON?

noh

leejp wrote: »

..............
I maintain that even after 10 years, using all of the ISA allowance in a stocks and shares ISA is the best long term result (7K / year), and the figures are much bigger than this silly cash ISA adventure.

As a basic rate payer, my gain with a cash ISA is £30 / year. THREE TENNERS FOLKS. :j

So after 10 years that is £300 or so with compound interest
....why on earth would I put 3K aside to chase £30?
What are you people ON?

Your grasp of mathematics is not good:-
Over a period of 10 years
£300 a month saved in a cash ISA at 6% = £48979
£300 a month in a savings account at 4.8%(6%-20% tax) =£46017

an advantage of £2962 gained by saving in an ISA for a standard rate tax payer.

Here's a link to a calculator on this site:-
http://www.moneysavingexpert.com/savings/savings-accounts-best-interest

Nigel

Aegis

leejp wrote: »

Bah! The negative British people - always turning the forum personal and bitter!

Well, if you're going to insult people with comments like " What are you people ON?" for no good reason, then you can expect the tone to lower a bit.

What happened to manners? Never mind eh!

Quite...

I maintain that even after 10 years, using all of the ISA allowance in a stocks and shares ISA is the best long term result (7K / year), and the figures are much bigger than this silly cash ISA adventure.

You're comparing apples to oranges there. You have a £3k cash ISA allowance this year that you can use and still get £4k of stocks and shares allowance. Why compare your £3k cash ISA allowance with a £7k maxi ISA allowance when in actual fact you only lose £3k of your stocks and shares ISA by utilising your cash ISA allowance.

As a basic rate payer, my gain with a cash ISA is £30 / year. THREE TENNERS FOLKS. :j

Just because you clearly haven't grasped this one yet:

THAT'S ONLY THE FIRST YEAR!!!

Compounding and further addition of interest turns it into £3000+ depending on what happens to your tax band, and if you have £40000 worth of savings at some point later in life when you're looking to retire and claim state benefit, would you prefer that to count towards your total savings and reduce your benefit money, or would you prefer it not to? Fairly simple answer there: anyone in their right mind who might claim means-tested benefit should most definitely tuck away their savings into ISAs for a few years while they can.

So after 10 years that is £300 or so with compound interest. Crikey, let's buy four new tyres for the car.

Even with only £3k invested at 5.5% for 10 years you'd be looking at £2124 of tax-free interest. With 20% knocked off the interest level, the figure is more like £1600, meaning that it's £500 for just that first £3k you save. Since most people require about 3-6 months of cash reserves in case of anything unexpected coming up in their lives, you might be looking at many times that amount saved into their ISA over several years, and then you're really looking at large differences.

Meanwhile, what would most people get out of a stocks and shares ISA? You don't even see the benefits of one unless you move into the higher rate tax bracket or sell off stock to make nearly £10000 worth of profit after all your losses that you offset it against. For many people, this is probably never even going to be an issue because they don't sell that much in a year and aren't higher-rate taxpayers.

So tell us: what benefit does the basic-rate taxpayer get from your "all stocks and shares" ISA approach? As far as I can see it, basic rate taxpayers would get much more of an advantage from the cash ISAs than the stocks and shares ones.

Someone mentioned tax free cash ISA for life. Listen, legislation changes, and caps are introduced.

If they do, they might equally get rid of the stocks and shares ISAs. Arguing on those terms is pointless, you can only plan financially based on what you know, not what you assume you know.

If I have £100K to invest then why on earth would I put 3K aside to chase £30?

It's not about "chasing £30", it's about sensible attitudes to money. You should never invest without a sizeable instant-access cash reserve, and cash ISAs are ideal for such a reserve because they're tax free!

What are you people ON?

Information, perhaps?

meester

Stop Feeding The Troll

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dipsomaniac

the stocks and shares (s&s) isa allowance is currently limited to £7000 pa (£7200 from 6 april). if you don't use it, you lose it.

the problem with saving £1 via a cash isa is that your s&s isa allowance is reduced by £1. there is no doubt that the best way to provide a capital sum over the long term is to invest in equities/property/commodoties via a balanced portfolio. there are currently PEP/ISA investors with portfolios in excess of £1million benefiting from a nice tax free income.

why not have your cake and eat it by using national savings for your tax free cash savings and you isa allowance for investing.

dipsomaniac

the op makes some valid points. i can't believe some of the childish comments they have attracted.

when you have people on here planning a military style excercise to ensure their cash is receive and applied to their cash isa account on the very first day of the tax year you realise that some people have over-estimated the benefits of cash isa's.

they are suitable for a few very risk averse people but as i said earlier why not use index linked saving certificates for your tax free cash savings and save you isa allowance for equities?

i will join the op and retire back under my bridge and wait for the flack from some very closed minded people.

debbie42

dipsomaniac wrote: »

they are suitable for a few very risk averse people but as i said earlier why not use index linked saving certificates for your tax free cash savings and save you isa allowance for equities?

The main reason for me is that I like the flexibility and easy access of the cash ISA, as opposed to the NS&I savings certificates. I do already have a significant amount of investments in equities, and am comfortable with the split. My OH is a higher rate tax payer, currently earning 8% tax free on his cash ISA, and that's hard to beat anywhere at the moment.

I am not risk averse: quite the opposite, but most of my riskier shares aren't eligible for an ISA anyway.

debbie42

meester wrote: »

Stop Feeding The Troll

I don't agree with the OP: either in the tone or the content. However, Aegis (and others) have made some perfectly valid points that may help others. Your post has done neither, and just caused me to get annoyed by scrolling past it. There is a certain irony there.