Should I fix or not?

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Dave05
Dave05 Posts: 19 Forumite
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in ISAs & tax-free savings
Hi
My ISA has now come out of its 1yr fixed term which was at 1.40% and I know we can't predict accurately what the interest rate will do but looking for some suggestions please or what others have done
1.Do I fix my isa again and how long have others/do people recommend
2. Do i just opt for a easy access isa sitting around 1.45% and move it here and there with the interest rates?

Thanks in advance:-)
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  • eskbanker
    eskbanker Posts: 31,054 Forumite
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    Why use a cash ISA at all?

    If you don't have enough money in savings to use up your personal savings allowance then you'll be able to earn more interest in non-ISA accounts, such as current accounts and regular savers.

    If you do have enough money in savings to use up your personal savings allowance then chances are you don't need all of it to be in cash form and it would make sense to consider investing some of the pot....
  • Reed_Richards
    Reed_Richards Posts: 4,169 Forumite
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    You need ISAs if you plan to be wealthy. If the annual interest you receive on your savings ever exceeds £1000 then having those savings in an ISA (or several ISAs) offers a significant benefit. You cannot invest a large sum of money (e.g. £80,000) all at once so you need to plan ahead. How far ahead you start investing in ISAs depends on how wealthy you plan to become.

    Assuming you don't envisage needing the money in your ISA at short notice then a fixed-term ISA is the right answer if you think interest rates will remain at their current level or fall. But the wrong answer if you think interest rates will rise during whatever term you are contemplating.
    Reed
  • eskbanker
    eskbanker Posts: 31,054 Forumite
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    Reed_Richards wrote: »
    You need ISAs if you plan to be wealthy. If the annual interest you receive on your savings ever exceeds £1000 then having those savings in an ISA (or several ISAs) offers a significant benefit. You cannot invest a large sum of money (e.g. £80,000) all at once so you need to plan ahead. How far ahead you start investing in ISAs depends on how wealthy you plan to become.
    Just to be clear, in the 'exceeding PSA' scenario I was advocating considering investing rather than saving (for at least some of the pot) but doing so via S&S ISAs, not by taking the funds out of the ISA shelter.

    However, if OP's pot is well below £80K then it may be less important to preserve ISA status if that can relatively easily be reinstated later on (after achieving short term gains) - the traditional benefits of ISA status have been weakened considerably in recent years by a combination of higher annual allowance, introduction of PSA and poor cash ISA rates.

    Perhaps OP will return and give some more info about size of pot(s), objectives, other assets, etc....
  • Dave05
    Dave05 Posts: 19 Forumite
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    Hi guys thanks for your replys really appreciated
    I go over my PSA due to 40% taxpayer and there savings elsewhere. This ISA is basically to be left for the foreseeable future

    Lookng at the fixed isas 1 year 1.65% to 5 years at 2.26% do i fix for 5 with the possible chance of having to withdraw with a penalty of 180 days interest or just fix year by year...decisions ha
  • ColdIron
    ColdIron Posts: 9,052 Forumite
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    Dave05 wrote: »
    I go over my PSA due to 40% taxpayer and there savings elsewhere.
    Would a pension contribution (and the generous tax relief) take you out of higher rate tax and restore your full PSA?
  • Linton
    Linton Posts: 17,172 Forumite
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    Rather than put the whole lot into one long term fixed rate account it could be better to set up a ladder starting with a 1 year account, a 2 year account... and a 5 year account. Each year one account will mature and you put the money in a new 5 year account. In this way you are getting access to some of the money every year should you need it but always receiving the higher interest available from a 5 year term.
  • Dave05
    Dave05 Posts: 19 Forumite
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    Coldlron, thanks for your message, yeah I'm currently on with the pension so I'll see how I get on there mate

    Linton, thanks for your message too, so by filtering like this im i right in saying it's allowed to have that many
    as your not 'paying in' to new isas just transferring matured ones
  • jimjames
    jimjames Posts: 17,621 Forumite
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    Reed_Richards wrote: »
    You need ISAs if you plan to be wealthy.

    If you intend to be wealthy long term then cash ISAs are not the place to be. I agree ISAs are worthwhile to build wealth but the S&S ISA version not cash.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Reed_Richards
    Reed_Richards Posts: 4,169 Forumite
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    jimjames wrote: »
    If you intend to be wealthy long term then cash ISAs are not the place to be. I agree ISAs are worthwhile to build wealth but the S&S ISA version not cash.
    If you have enough disposable income to put £20,000 per year into an ISA then it would not take too many years to become modestly wealthy, if you don't spend too much of what you have saved. In the long term your savings might well grow faster if invested in a balanced portfolio of shares but it would be prudent to keep some of your savings in cash. And your question was about options for cash ISAs.
    Reed
  • eskbanker
    eskbanker Posts: 31,054 Forumite
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    Reed_Richards wrote: »
    In the long term your savings might well grow faster if invested in a balanced portfolio of shares but it would be prudent to keep some of your savings in cash.
    Nobody was suggesting otherwise, but we're highlighting that cash ISAs are poor value for money and so cash holdings would typically be expected to earn more interest in taxable accounts (again assuming that uninvested cash is kept below levels where interest would exceed PSA).
    Reed_Richards wrote: »
    And your question was about options for cash ISAs.
    It was OP (Dave05) who was asking about cash ISAs and others who highlighted that there are potentially better solutions available....
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