Clarification on Stocks and Shares ISA

Baldur

MRLX69 wrote: »

And each year, you still can only contribute to one. So you cannot put 3600 into your cash and 3600 into your S&S - is this right?

You have an annual ISA allowance of £7,200.

1. The whole £7,200 can be paid into a Stocks & Shares ISA OR
2. Up to £3,600 can be paid into a Cash ISA and the balance can be paid into a Stocks & Shares ISA

debbie42

MRLX69 wrote: »

So you have (for simplicity) ONE cash ISA and ONE S&S ISA.
You opened them both at different tax years right?

And each year, you still can only contribute to one. So you cannot put 3600 into your cash and 3600 into your S&S - is this right?

No, you can contribute to both, in one tax year. The total is £7200, and you can only contribute a max of £3600 to the cash variant. You can't contribute to two cash or two s&s isas, but one of each is fine.

so you could, for example split it half and half
£3600 cash £3600 shares,

or, say,
£2000 cash, £5200 S&S

You should also be able to transfer from cash ISAs to share ISAs. Old ones and current, I would have thought, though I'm not sure about the rules for partial transfers.

I just sent you a pm btw!

MRLX69

Thanks Debbie!! - your advice is much appreciated!

david78

You can hold some cash in a stocks and shares ISA while you think about where to invest it. But this usually earns only a derisory interest rate. And there is a "tax" (technically a charge) of 20% on any interest received.

The alternative is to put your cash into a separate cash ISA where the rates are better and the interest is tax free. At any time you can (if you wish) transfer a cash ISA to a stocks and shares ISA. You can then invest it by buying shares or funds.

The rules regarding cash ISA -- to -- stocks and shares ISA transfers are

(1) Past years ISAs can be transfered in full or in part.
(2) A current year ISA must be transfered in full.

If you do (2) then you can start another cash ISA the same year if you want, provided you will not breach the £3600 limit for the cash ISA and the £7200 overall limit.

And they said they have made it simpler!

StuartGMC

Interesting thread, thanks all.

Had not noted the clause on Stocks & Shares ISAs not being able to be moved to Cash ISA:
Current year's Shares ISA. You may move ALL of this to another Shares ISA, you can't move it to a Cash ISA, or split it between more than one Shares ISA.

This seems very counter-intuitive, wouldn't it seem sensible that people looking for growth when younger invest in the Stocks & Shares version, then move more to Cash ISA as a safer haven as they get closer to retirement? This seems to then require a move from Growth funds to Income funds but kept in the S&S ISA?

Encouraging move from Cash ISA to Stocks & Shares seems to be the wrong way round?

Anyway, it is an important point for us to consider in the context of growing savings and then moving to a safer haven. I think I'll need to consider, but, at 43 the time now is for growth over 10 years or so with consideration of lower risk (still in funds) plus bonds etc close to retirement... However, rules change so I'll keep an eye out over time.

dunstonh

This seems very counter-intuitive, wouldn't it seem sensible that people looking for growth when younger invest in the Stocks & Shares version, then move more to Cash ISA as a safer haven as they get closer to retirement? This seems to then require a move from Growth funds to Income funds but kept in the S&S ISA?

The cost to the treasury in stocks and share ISAs is less then cash ISAs. However, income funds and in particular low risk funds such as bonds and fixed interest funds benefit more from ISA status than growth funds.

Too many people do not realise that stocks and share ISAs does not mean you have to invest in stocks and shares. You do have other asset classes of lower risk available.

MrMalkin

dunstonh wrote: »

Too many people do not realise that stocks and share ISAs does not mean you have to invest in stocks and shares. You do have other asset classes of lower risk available.

I think I am one of those people, at least I do not understand it fully. Is there a way to set up an S&S ISA with certain funds in such a way that you get a fixed return with no risk, other than with the cash component? Do bonds provide this type of security or not?

When I was young and naive I was persuaded to open an S&S ISA when what I actually wanted was a Cash ISA. It didn't bother me too much in the immediate aftermath because the funds did well, but now that things are on the downswing it's not so great, especially since I plan to withdraw the money for a house deposit in the next year or so. I'm already paying into a separate Cash ISA, so I see my options as either to convert the S&S ISA to very safe funds or withdraw the balance and put it into a savings account.

dunstonh

Is there a way to set up an S&S ISA with certain funds in such a way that you get a fixed return with no risk

No. You can get capital security to varying degrees (some on death only, some will give protection upto 50% drops and some full protection. The terms/charges/features will vary with each option).

Do bonds provide this type of security or not?

Not in the way you mean. They can be far less volatile and with yields running into double digits, that does buy you some protection. i.e. if yield is 11% then the unit price can drop by that amount more or less and still break even.

It didn't bother me too much in the immediate aftermath because the funds did well, but now that things are on the downswing it's not so great

Ups and downs always happen. You just dont know when and by how much. That is why its a long term view. The lower risk areas without capital guarantee still have ups and downs but to lesser degrees. The last few years havent been good for bond funds but things are looking very nicely for them this year. Although you do have to be a bit picky and realise that all bond funds are not the same and some can be low risk and some can be quite high risk.

since I plan to withdraw the money for a house deposit in the next year or so.

That limited timescale has cash written all over it. Obviously for money already invested its a case of deciding when its best to do it. Take it now and you know what you have. Take it in 3, 6 or 12 months and it could be lower or higher. Phasing down the risk scale could be a short term option but ultimatly you want to be out of Stocks and shares ISA and into cash.

MrMalkin

dunstonh wrote: »

Good stuff

Thanks very much for that, I'll think it over for a few days and make a decision, but moving to cash savings is obviously the zero-risk move at this point.

shucks

I have been give £5000 for my new baby and I'd like to open a new isa to save some of it for him (I know it can't be in his name as he's a bit too young!) but I alreaday have a cash isa of my own from last year.

1.can I open a new isa with £2000 and still pay £1600 into my isa from last year?

2. or could I open a new isa on his behalf with £3600 and then pay into my own isa next year?

3. my husband has already invested £3600 in his own isa for this year but he has an old isa from years ago with roughly £2000 in that he hasn't touched for years - could he transfer this isa into an isa that i open with £3600 of my own money this year?

This is my first time using this site so I'm sorry if I am doing this all wrongly but thank you so much for any help you can give me.