6 April marked the start of the new tax year and a chance to invest in a new cash ISA! Cash ISA rates are, once again, exceeding rates you can earn outside an ISA and if you are Nationwide Flexaccount holder there is a great 4.25% cash ISA available to you, providing you have new monies to put in, as ISA transfers in are not permitted. You cannot consolidate any existing Nationwide ISAs into the Flexclusive ISA either. It is an instant access cash ISA, with unlimited withdrawals and 4.25% on the whole balance (minimum balance £1). Strangely, it is a branch-based account with a passbook but it can be opened up via telephone (despite what Nationwide's website says) and you can add funds by internet banking. But, withdrawals have to be made at a Nationwide branch. The 4.25% is made up of two elements... 1. 2.25% bonus guaranteed until 31 October 2013. 2. A 1.5% above base rate guarantee until 1 January 2014. As the base rate is currently 0.5% that equates to 2% at the moment. You need a Flexaccount which has at least £750 external funding each month for that last three months and you need to continue with £750 external funding each month or Nationwide could transfer you to one of their other ISA products. If you don't have a Nationwide Flexaccount, you can transfer your existing bank account to Nationwide and qualify for the Flexclusive ISA immediately, but you will still need to fund externally of at least £750 in future months. Nationwide have other 'Flexclusive' perks, such as free travel insurance (Europe only, sorry), 0.5% cashback Select Credit card and others... http://www.nationwide.co.uk/current_account/compare_us.htm
ISA's are a questionable investment for anyone who is not already exposed to capital gains tax. I had a couple about 10 years ago but cashed them in when I really needed the money a good few years ago. If you are directly investing in equities you may well get a much better return and unless you are really loaded (I know you aren't Howerd, I'm just speaking rhetorically) you will probably not even begin to reach your capital gains allowance year on year. ISA's are a nice simple to understand investment though and I do understand why folk invest in them but they are not the best long term investment vehicle for the average person, they make sense though if you want to split your risk regards pension and tax at time of payout. In other words, you invest income that has already been taxed and your payout is eventually tax free, compared to investing in pension where you invest more up front but possibly pay tax on it when you retire and purchase an annuity, if you split the risk by doing a bit of both you have a little bit more control at retirement. Personally I only have enough spare cash to invest in pension, my employer matches my contribution up to 4% and provides a base 6% contribution which means my total contribution can be up to 14% currently I am at 10% although I could contribute more personally and probably will soon. I have several pensions but I took out my main one a few years after I started my business in 1996, still not got an awful lot saved, 10 years ago it would have been a lot (all three combined) but annuity rates are so bad that my prospects are not great, one can but hope, at least pension savings can still attract 40% tax relief. I feel that pension investment is the better bet for most folk but I am open to argument on the subject Last point if you are our age Howerd, over 50's early 60's, then it is a bad idea to invest in things that are very speculative towards the late 60's you should be converting to cash and gilts to get security on your funds, saying that every old pal I have ever had has had really crazy strategies near to age 65, I had a very good friend in Scotland, a lot older than me, who lost out horribly in the dot.com boom and bust just as he was retiring, lost about 50% of his funds almost overnight just when he needed to retire.
I am a few years older than you, OSS, 61 to be exact. One point, an ISA is NOT an investment, but merely a tax-free wrapper around a cash or investment product. I was only talking about a cash ISA, and any argument you make about Capital Gains Tax on Stocks and Shares ISAs simply does not apply to cash ISAs. My low and uncertain income and proximity to retirement does not make stocks and shares ISAs a viable proposition for me. For most people, of course, it is the 25% tax-free lump sum from pensions which can be put towards an annuity, that makes pensions better than ISAs. If, like yourself, your employer makes contributions that is also an incentive for choosing a pension over an ISA. If you can get 40% tax relief on some/all your pension contributions, and if you will only be in a basic rate tax bracket after retiring then that is a further argument for putting monies into a pension. For me (a non-tax payer) pensions are also attractive as it is still possible to get tax relief on gross pension contributions up to £3,600 (strange but true). Of course, once your monies are in a pension, they are there for good, you cannot take them out and invest the monies elsewhere. That can be seen as both an advantage (stops reckless spending) and a disadvantage (cannot predict what life course you may choose in the future). If I was not getting married to a Visa national, I would have no hesitation in putting more monies into a pension. I had been contributing my £3,600 limit into a pension (and earning tax relief on tax not paid in the first place) for a few years but simply stopped as soon as I got engaged! I need the cash to support her now and to bring her into the UK (hopefully soon).
It's not an investment as such but depending on the actual underlying investment it will have risk. Yeah I understood the point about it being a cash ISA but that was a limited form of the ISA construct, many more were sold as equity investments (non cash), my daughters mum got badly stung on a cash ISA (Shona not Ana) but she just got in at the wrong time, I don't think she lost a lot but she did not make anything over a 5 or more year period. My equity based ISA's made a small profit in the time I had it, a few hundred quid at the end of the day not a lot, the total investment was about 4000 pounds. I do get 40% relief and I definitely (under current rules) will be in the lower rate tax band when I finally retire, even with the many many years of work in front of me that I can currently expect. I am looking very carefully at increasing my contributions this month, I could use the cash but Ana really has to live on what I send already, she is not poor. If I up my contribution by two percent my employer has to match it, it is a couple of grand a year and as such is worth it, particularly when markets are weak, at least if you believe they will eventually recover Right now 50% of my income goes to the Phils to support my two children, I only wanted it to be 33%, then I could save something, but the real world dictates that extra is needed every month and while it pisses me off I am not so dumb as to imagine that she is scamming me. However it is true that Ana has little clue how to manage her money and we rarely get reasonable value, before anyone gets on their high horse, I am the one that shops for food in the supermarket any time I am there, I know the prices of most things over there, the only thing I object to is wasted expenditure. So next payday I was going to buy a flight to go be with my family, but reality is they need so many basics that I now can't afford the flight, so I won't be going, maybe October or December now, it's James' 7th birthday in October and 7 is an important one in the Phils, so maybe that is a better idea for me Very depressed right now
