ISA versus Savings Accounts

I've taken nearly all of my savings out of my ISAs today and I am putting them in an account that I will have tax deducted.

Some may think "that's plain daft" but here's why: - I had one ISA giving 1.4% interest, which they then closed plus another giving 1.2% interest and I expect that too will be discontinued before long as this happens every bloody time.

However, my bank then offered a Savings Account to run for one year where I can put up to £500 per month at a Gross Rate of 5%, which means after Tax I'll get 4% interest so why the Hell do I need to bother with ISAs now, even though this ever-generous Government has increased how much we can save tax free?!

I have now bumped another £500 into my savings account today and will keep doing this until my year is up, by which time I suspect another Savings "vehicle" will be created but what I do not understand is why is it better business for banks to offer these interest rates on savings when they only offer piss-poor ISA rates?

I used to use my ISA interest to pay all sorts, usually my Road Tax and sometimes a bit more for something else but ever since we went to these minuscule interest rates I've been worse off technically speaking by about £100 per year so I thought Sod it, if I have to pay bloody taxes to get a better interest rate so be it!

Anyone else doing this too? stevmk2

Re: ISA versus Savings Accounts

Don't forget you can now earn £1,000 tax free on savings (excluding ISAs). My bank pays less than 1% I think on my e-ISA. However soon I will have the funds from an ISA bond going into that accout, as it matures next week, and I will then take a long hard look at what's on offer elsewhere. I too am sick and tired of these paltry interest rates.

Re: ISA versus Savings Accounts

Got rid of my ISA too - absolutely appalling interest rate. I got a `bonus` interest rate of 1.4% for keeping it for 12 months then it dropped to a lower interest rate and continues to keep falling.

Have transferred it to a 2yr bond @ 1.25% - still abysmal but at least interest is paid gross.

Re: ISA versus Savings Accounts

Problem with ISA's is that they are 'personal' and cannot be joint, so if you die your spouse has to jump through hoops to get access to the funds.
All my accounts are joint and when one of us dies the survivor still has access to all the funds making things easier at this difficult time.

Re: ISA versus Savings Accounts

I know Jazzi.
I also got the extra tax allowance added on as my wife doesn't use £2700 per annum of hers - OK it's not much but I do gain £18 per month now and there's a chance that it might increase my MP says - and he's a Conservative.

My wife's e-ISA matured Jazzi and she was offered a paltry 1.2% which she took as it was about to go down to 0.50%!

I'm looking at a Savings Account for her now that pays 2% gross because she will not be liable for tax on the small amount she can afford to put in savings monthly anyway - I asked!

It often annoys me that all the parties know the ones they can more or less rely on to vote every time are the same ones who often get the s**t end of the stick with Government policies and / or media wilfulness - about time we all showed the b'stards what we think - starting with the EU next month!
We did beat the Germans in 1945 so how come we are being dictated to by them and France, who we went to the aid of by the way! stevmk2

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Mark Carney at the bank of England reckons that if we come out of the EU interest rates will rise Steve...........And the bad news is?

Re: ISA versus Savings Accounts

The next time one of my ISAs mature I'll be looking at peer-to-peer lending:

http://www.moneysavingexpert.com/sav...o-peer-lending

Re: ISA versus Savings Accounts

Now THAT looks interesting!

Thanks for that Omah. stevmk2

Re: ISA versus Savings Accounts

Quote "However, my bank then offered a Savings Account to run for one year where I can put up to £500 per month at a Gross Rate of 5%, which means after Tax I'll get 4% interest so why the Hell do I need to bother with ISAs now, even though this ever-generous Government has increased how much we can save tax free?!"unquote


Doing this is ok providing you put £500 a month in every month and don't draw on it. Also if you miss one payment the agreement ceases and you get no interest at all. Fine if you have a spare £6,000 for the year .
What you don't say if it is compound interest or not, and for the first month you get nothing on the £5500 remaining to put in.

Possibly better putting £6000 in a fixed 5 year ISA and not paying tax on it

Re: ISA versus Savings Accounts

Steve said: Quote "However, my bank then offered a Savings Account to run for one year where I can put up to £500 per month at a Gross Rate of 5%, which means after Tax I'll get 4% interest so why the Hell do I need to bother with ISAs now, even though this ever-generous Government has increased how much we can save tax free?!"unquote.....

The gross interest might look good Steve, but if I understand what you are saying correctly, you will not actually be getting 5% across the whole of the £6000 you save for the 12 months (not even 4% taxed). First month you will get nothing. Second month you will get 5% on the first £500, third month 5% on £1,000 and so on throughout the whole year. You only get 5% on the £6,000 total for the last month of the investment, and usually you have to sweep the amount out into another account and start again for another year on whatever terms they advertise then, which could be lower or higher depending on the rates then. So you never actually get the 5% for all of your money invested for the year and what's more you will pay tax on it (if/once you have used up your tax free allowance). It's a similar principle to drip investing in shares - where you don't put in all your money at once but drip feed it bit by month each month.
I don't think there is anywhere at the moment where you can get 5% for a lump sum of £6,000 invested for 12 months risk free.
Obviously I don't know the value of your ISAs, but did someone advise you to take out all you ISA money and invest it this way. If so I think it was a mistake as you cannot put the ISA lump of money. previously saved over the years back into an ISA, if you want to.

I am no money expert, but I don't think I am wrong. We saved for our grandchildren the way you describe (and because they were children they did not pay tax anyway) but we could only invest a maximum amount in any one month and when it was worked out the headline interest rate (which was more than 5% at the time) looked quite poor even taking into account that there was no tax to pay because they were children.