Why Bother With Isas?

[sandyRoe]

I had a letter from my building society telling me how much I could put into an ISA. With interest rates so low why would anyone bother?

[Ann]

I agree Sandy - that's if we have any savings left to put in an ISA seeing as we have been living off them since we retired ;)

[Ann]

I don't understand about these new ISAs called NISAs announced in the Budget yesterday ......................

[grasscarp]

Basically we can put double amount into a cash ISA

[Canary42]

ISAs usually give better rates than ordinary savings accounts and are tax-free.

[Gizmonster]

What are you going to do with any spare cash - spend it or save it ??
Admittedly, rates are pants at the mo, but if you put any spare cash into an ISA, when rates go back up ... and they will .... eventually ... you'll have all your spare cash earning interest tax free.
It wasn't too long ago that my ISA was earning 6% tax free ..... I just keep topping mine up with any spare cash, waiting for the day to return :)

[bhg481]

Actually Grasscarp, you will be able to put almost three times as much into a cash ISA (NISA) since you will be able to put the whole £15K in as cash.

[pixie373]

What is the allowance for this year please? I would definitely recommend them. Mine is two years fixed and i got a statement last week (end of the first year). Got £531.61 interest. Looking forward to next year's!

[Old_Geezer]

I have been saying that about savings generally for a long while now. But if you have cash in your current account getting nothing may as well be putting sixpence a year in your pocket.

[chrissa1]

They are not taxed, that's why.

[sandyRoe]

Didn't Mr McCawber say somewhere that the difference between abject misery and happiness was sixpence?

[Tilly2]

Mr Micawber's famous, and oft-quoted, recipe for happiness:

"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

[Ann]

Aren't the savings in one of these new ISAs tied up (so you can't get at them for a fixed term?) If not and you can draw on them as needed, surely you should put the full £15,000 in them - is that a Mini Cash ISA (which is what I think we have)

[pixie373]

You can withdraw from fixed ISAs, although you lose the interest on what you've withdrawn. You also can't replace money you've withdrawn, so if you think you'll need it, it might be better to pay smaller amounts in, in stages.

[Gizmonster]

Easy access ISAs generally pay less than fixed term ISAs, as you can withdraw money when needed, with no penalty.
However if you look around you can find good deals:
Best one I've found at the mo is Coventry's 2.75% fixed for 2 years. You can withdraw cash, with a penalty of 120 days interest. Depending on how long you leave it in, it's still very attractive. If you withdraw the money after just 12 months, the effective rate is still 1.85% .... withdraw after 18 months and the effective rate is 2.15% and if you withdraw just before the 2 years are up, the effective rate is 2.30% .... not many ISA's are offering these kind of rates, so tying it up and paying the penalty isn't always as bad as it would first appear.

[Old_Geezer]

One can get blinded by the 'not taxed' benefit. On a number of years I put some finance into an ISA simply because the end of the financial year was coming up and it seemed not a great idea to miss the opportunity: only to find a few years later the "investment" had been so laggard the lack of tax had hardly been worth the hassle.

[factor-fiction]

"... only to find a few years later... "
Yes, that is the main problem with variable rate ISAs- you have to keep a close eye on them and be prepared to transfer them as soon as the introductory rates end.

[237SJ]

I`m hoping that that the banks might get into an interest savings rate price war now that people can save up to 15K in a cash isa. After all, they are going to be competing for your custom. We shall see.

[factor-fiction]

I doubt that will happen, 237SJ. Since the quantitative easing programme started in 2008, and the reluctance to lend because of the risks of defaults, banks and building societies have been able to raise all the funds they need without much effort- which is why ISA rates have been so low and most offers are pulled pretty quickly once the quota of funds has been filled. I doubt this will make much difference- ISA providers don't really need the money

[237SJ]

I agree but if the banks are competing with each other, then someone is going to have to offer a better rate than others? Mind you, the better rate will probably .1%.

[factor-fiction]

Unfortunately I think the opposite may happen. The banks/building societies have enough cash reserves, so if savers have more money to throw their way they canget away with offering less interest than at present