ISAs - are they worth it ?

If the interest rate is less than the rate of inflation, you're better off buying cool stuff now than buying cool stuff a few years down the line!!
 
I've got money saved up for my son which is locked up in Skipton Building Society account for 5 %.

Has to be fixed for 5 years mind, but been as its intended for when he's 18 thats not so much a problem. You may well be able to get better than 5 % before 5 years up so i'll have fixed too low. But i'm betting the rates won't go significantly higher than 5% in the next 5 years. We'll wait and see if my gamble pays off.
 
See I like the logic of buying the cool stuff now... but would be worried if something happened and I found that I really needed the money :-(
 
Cash ISA is the only decent way to keep your money in any vaguely healthy shape atm - esaving accounts mostly have hit rock bottom, I've seen people lose thousands lately from S&S - really not a good place to put your money unless you have a lot of experience with that kinda investment and the time to get the best out of it.

As von helmet said £150 > 0 and even better than a loss.
 
Rroff said:
Cash ISA is the only decent way to keep your money in any vaguely healthy shape atm - esaving accounts mostly have hit rock bottom, I've seen people lose thousands lately from S&S - really not a good place to put your money unless you have a lot of experience with that kinda investment and the time to get the best out of it.

As von helmet said £150 > 0 and even better than a loss.
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S&S ISAs allow you to put your money in things like bonds & gilts which are safe.
 
I transferred a Santander ISA to a Halifax ISA last night in 20 minutes. Steps below:

A) Go on to Halifax website
B) Sign up for new ISA and fill in details (10 minutes)
C) Copy down account number and sortcode when your account is opened
D) Download and print ISA transfer form from their website. (2 minutes)
F) Fill in. (5 minutes)
G) Put in an envelope, with the address that's on the ISA transfer form on. (2 minutes)
H) Post.
 
jamief said:
Lots of gilts paying reasonable returns - have a look at http://www.selftrade.co.uk/quote.php?symbole=4uT4Q
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That is a 25 year government bond. Not the thing to be buying just as interest rates are just about to go up. Yes, you get 4.25% in 'interest payments' per year but you would be buying on the back of a rally in prices following events in Japan and Middle East. If you bought this bond in October at 104% and now it is trading at 99.7 then you would have made a capital loss. Equally, if you had bought in February at 95 pre Japan then you would be sitting on a nice capital gain (which I believe is tax free whether it is inside or outside an ISA)

If we avoid any further disasters that I would anticipate seeing the price decline from current levels. If you hold for 25 years there is no impact for you, if you want to liquidate in 5 years and we are trading at low 90s then your net return could be much lower.

In the current environment there is very little around, and you very rarely get a free lunch in the markets (aside from picking up some nice deals post market panic selling).
 
ISA = long term as said.
Todays low rates aren't worth really worrying about as said, but you can get 3% tax free without too much hastle, ie just about protecting your investment from inflation.

BUT what your doing is giving yourself the potential to make a real diff in years to come when rates do rise. You are capped in the amount per year, but your not capped in total, so lets say in 5 years you have put 5k away per year, if interest rates are 6% then you should be able to find an ISA paying that, thats a very big diff at 20% let alone 40% tax rates, it would be almost impossible to get a "normal " account that pays the 6% plus what you need to make up the tax.

So are they worth it, absolutely for medium to long term, ESPECIALLY for higher rate tax payers. They are still worth it for the rates now if you look around and get a half decent one, they are not inflation proof, but nothing ultra low risk is, if you want inflation proof you have to look at higher risk and then you are standing the potential to lose original capital let alone suffer a % or 2 hit from inflation.
 
You should always consider paying off debt first though, just about any borrowings at all will be more expensive than the rate your gaining by savings. Some people like to maintain an amount of liquidity (ie cash they know they can demand at any time) and TBH I would agree with this. BUt excessive liquidity if you have any loans is pointless.
 
It's like going to a finacial advisor on any high street, and asking them what they think is the best thing to do with your money.


Seriously - If they were that good at financial advising - why are they working 9-5 in a high street shop and not retired, living on some Island with £5000 a month income and no worries ?


As for using your savings to pay off any debts first - that's all well and good. But tell me, why approx. half of the financial advisors say always keep 3 months wages as savings - in case of emergency ? Just how much money do people on here think people realistically have for savings these days after all the bills ? And what would you propose doing if you paid off some of your debts with all your savings - only to find you were then out of a job and had no back-up plan for that rainy day.
 
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britboy4321 said:
If the interest rate is less than the rate of inflation, you're better off buying cool stuff now than buying cool stuff a few years down the line!!
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A flawed assumption which is made by people who inflation affects everything you buy in the same way. In reality the RPI is an average from a basket of products.

Some things you want now might even be cheaper in a few years.

Not everything inflates.
 
PASONIX said:
As for using your savings to pay off any debts first - that's all well and good. But tell me, why approx. half of the financial advisors say always keep 3 months wages as savings - in case of emergency ? Just how much money do people on here think people realistically have for savings these days after all the bills ? And what would you propose doing if you paid off some of your debts with all your savings - only to find you were then out of a job and had no back-up plan for that rainy day.
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Exactly why I said keep some liquidity, what suits one person wont suit another.
Person A may have a redundancy payment of 12 months take home, person B may have nothing. Would you advise both them to keep 3 months wages as savings?

Only the OP knows his specific circumstances. But they very fact hes talking about £5k makes him sound like someone who isn't living hand to mouth?
 
jamief said:
S&S ISAs allow you to put your money in things like bonds & gilts which are safe.
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Bonds and gilts have capital risk.

Say for example you get a gilt paying 4.5%. You pay as you've said 98p on the pound.

What happens if inflation tomorrow is 10%. How much are you going to be able to sell that gilt for? No one is going to pay you 98p.

Yes you are right in that the government will continue to pay you your 4.5% (low risk of default), but your money is tied up investment paying a terrible 4.5% unless you're willing to take the massive capital loss.

It isn't just inflation which can cause this either. That is why investment banks have massive fixed income departments researching this.
 
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Of course they are worth it, tax efficiency is always a good thing. A lot of them have promotional periods, where the rate drops after 12mths or so, but when this happens switching them between ISA's and providers is incredibly easy.
 
Silly question time! If you decide on an ISA early in the year (pay in the full amount), I guess you are pretty much tied into that account? Or does it pay to switch accounts later on in the year if you spot one that has a higher rate and allows you to transfer in?
 
i've just got wise to this, should have moved money before now :(

i have a normal savings account and cash ISA with ING direct. just found out my normal savings are only getting 0.5% and my cash ISA is down to 1%. both were good rates for the first year, and I liked ING for the no penalty access to your money


well now i've opened a new instant access saving account with Santander (the 3% one) gonna transfer everything in there, or may put the max I can in the cash ISA and the rest in the saving account anyway

then next year when these rates fall to the default move back to ING :p and so on and so on

bit of a pain but worth while
 
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