ISAs. Please Explain.

Discussion in 'Finance, Property, Law' started by SOLSTICE, Jun 6, 2009.

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  1. I understand the difference between cash isas and stocks and shares isas.

    The bit i don't understand is that it says you can have a cash isa limit of £3600 a year, does that mean you can only have that much in an isa or you can only put that much in each year.

    For example, could i put £3,600 in a cash isa every year for say 10 years for example and have £36,000 in my isa (not including interest) is that right?
  2. Broadly speaking, yes.

    You could keep each ISA with a separate company, in which case you would have 10 ISAs each worth £3600. Or you could have one ISA worth £36,000 after 10 years.

    If you don't have a lump sum, the best way to save is with a regular standing order straight from your bank account on the 1st day of the month (straight after pay-day) so that you don't miss the money! Read the small print because some ISAs will not let you touch the money once it is there.

  3. thanks for clearing that up, i'm hoping to save about £15-20,000 in the next years to come for a deposit on a house so will an isa be a good choice for that type of saving? And are the rates of interest usually above that of inflation?
  4. oh and if you know, do i gain interest on all the money in an isa or just the 3600 i can put in each year?
  5. All I'll say is check the interest rates often. They often have high interest rates for new guys but after a while - not so much. Basically reliant on you not checking up.

    I had ISAs with the Nationwide, interest rate fell to something scandalous, all I had to do was pop in and have them converted to a much higher rate by agreeing not to touch them for 6 months! It is worth keeping abreast of it all because over the course of a year and with multiple ISAs it all adds up.
  6. If you are saving for a house, I recently posted a suggestion:

    Abbey's offer

    but that isn't an ISA.

    1. Hmm, as good a choice as any!

    2. As inflation (RPI) is currently in negative figures, the answer is "yes" but the going rate for long-standing ISAs is currently <1% which isn't very much! However, we are in very strange waters at the moment, and these conditions will not last. Generally, interest rates will be above inflation but there is no guarantee of that.

    If you are planning to save over "several years", why not be more adventurous and opt for a shares ISA? Risk and reward!

  7. msr

    msr LE

    Speak to an Independent Financial Adviser.

  8. squeekingsapper

    squeekingsapper LE Reviewer

    If you are looking over several years, I would be inclined to suggest a guaranteed account which has a tie in of 5-7 years, and has no risk to the capital and considering the market a better return than any ISA.

    That said, if you have the money, get your mortgage now and buy a house, even if it is to rent it out as the housing market looks to be turning, so house prices will start to climb again very soon
  9. Sage advice there indeed - use it.

    I'd steer clear of Cash ISA's because the interest is nominal. I'd steer cleer of Stocks and Shares ISA's for the reasons SS has given.

    If you haven't got the cash to get a house now, you could do worse than go for Guaranteed Bonds for the next 5 years and you wouldn't be tied (as much) to the amounts invested. So for example in year 1 you need to get a 5 year bond, year 2 a 4 year bond and so on. There is less flexibility for withdrawing your cash if you need it urgently and usually with penalties.
  10. DO NOT steer clear of ISAs if you're a long-term saver.

    ISA's should be the FIRST port of call for your cash, before you invest, buy gold or open some high-interest account. Your ISA allowance is time-sensitive.

    ISAs will be widened to £5,000 per person as of next year. Interest rates will pick up again, whenever that is, and if you've saved two years worth by then, say, 7,200, then when int. rates hit 6-9% again, you'll do well.
  11. My bad Solstice, I just re-read your post again and it indicates potentially saving over 10 years.

    With that in mind The King is right. However the question is when will the interest rates pick up? That said if you go for an ISA, generally over this time frame the Stocks and Shares ISA will out-perform the Cash one, but you need to be aware of the potential risk you'll be taking to get the reward.
  12. Thanks for the reply's. I think i'm aiming for the 7-10 year saving market right now, so probably have a cash and a stock and shares isa and get the best from both. Thanks for the advice.