Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19
Boris Johnson's "Do or Die, Dead in a Ditch" Brexit Strategy - 11th Sep 19
Precious Metals, US Dollar: How It All Relates – Part I - 11th Sep 19
Bank of England’s Carney Delivers Dollar Shocker at Jackson Hole meeting - 11th Sep 19
Gold and Silver Wounded Animals, Indeed - 11th Sep 19
Boris Johnson a Crippled Prime Minister - 11th Sep 19
Gold Significant Correction Has Started - 11th Sep 19
Reasons To Follow Experienced Traders In Automated Trading - 11th Sep 19
Silver's Sharp Reaction Back - 11th Sep 19
2020 Will Be the Most Volatile Market Year in History - 11th Sep 19
Westminister BrExit Extreme Chaos Puts Britain into a Pre-Civil War State - 10th Sep 19
Gold to Correct as Stocks Rally - 10th Sep 19
Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - 10th Sep 19
Stock Market Sector Rotation Giving Mixed Signals About The Future - 10th Sep 19
The Online Gaming Industry is Going Up - 10th Sep 19
The Unknown Tech Stock Transforming The Internet - 10th Sep 19
More Wall Street Propaganda - 10th Sep 19
Stock Market Price Structure Still Suggests We Are Within Volatile Rotation - 9th Sep 19
Stock Market Still Treading Water - 9th Sep 19
Buying Pullbacks in Silver & Gold - 9th Sep 19
Government Spending - The High Price of a "Free Lunch" - 9th Sep 19
Don't Worry About a Recession - 9th Sep 19
Large Drop in Stocks, Big Rally in Gold and Silver - 9th Sep 19

Market Oracle FREE Newsletter

The No1 Tech Stock for 2019

Best Cash ISA 2012 to Reduce Stealth Inflation Theft of Value of Savings

Personal_Finance / ISA's Jan 26, 2012 - 03:11 AM GMT

By: Nadeem_Walayat

Personal_Finance

Best Financial Markets Analysis ArticleUK Inflation of 4.2% despite coming off of a 5.2% spike continues to soar at more than twice the official target rate of 2%, which stands against the more recognised RPI rate at 5% and real inflation as experienced by most of the population at 6%. UK savers continue to have the real terms value of their life time accumulated savings effectively stolen so as to bolster the bankrupt bailed out banks balance sheets. Savers can lessen the stealth theft of wealth by utilising their annual cash ISA allowances before the end of the current tax year (5th April 2012) as it is a case of use it or lose it.


Cash ISA's being tax free favour tax payers and are especially beneficial to higher rate tax payers. If you have already utilised this years ISA allowance, savers should still ensure that they check the interest rates being paid on ALL of their cash ISA accounts on a regular basis, especially for those accounts that have matured as the banks and building societies are notorious for including 1 year bonuses that disappear on anniversary or dumping matured fixed rate accounts into pittance paying cash ISA accounts paying as little as 0.1%. i.e. 1/30th the rate of a typical top paying instant access account, which on an ISA account balance of £5,340 means the difference between receiving £5.34 or £160.20 in interest per annum.

Current Savings Interest Rates Market

Current savings interest rates remain depressed in the region of between 2% and 3% for instant access accounts. Fixes are available of as much as 4% if savers lock in rates for several years. The chances of rate hikes during 2012 in the face of a near certain double dip recession are pretty low and only likely to take place if the government is forced to raise interest rates as a consequence of Bond Market troubles as a consequence of Britain's growing debt mountain that recently passed £1 trillion on the official PSND measure, whilst real total debt and liabilities approximates a far higher £10 trillion.

Beware of Tricks Banks and Building Societies Play on ISA Savers

One of the biggest tricks that the banks and building societies tend to play against ISA savers is to offer a lower interest rate on ISA's than similar non ISA saving accounts, therefore wiping out virtually all of the tax free benefits of a Cash ISA account for basic rate tax payers. Yes it is highly unethical behaviour by a banking sector that tax payers are still being forced to pay for, whilst the bankster's pay themselves billions in bonuses on the basis of fictitious tax payer funded profits. However there are other benefits to ISA's in terms of tax credits and self assessment tax returns, where the interest earned is not counted.

Beware of price comparison sites, they tend to offer what pays them commission and not necessarily the best rates available.

Best Instant Access ISA's

Financial Institution Interest Rate Minimum £ Comments
AA ISA 2 3.05% £500 Does not allow transfers in. Includes a 1.35% bonus for 12 months.
ING Direct 3.00% £1 Does not allow transfers in. Rate guaranteed for 12 months.
Virgin Money Easy ISA 2.85% £1 Allows transfers in, includes a 2.31% bonus for 12 months. Option to have interest paid monthly.
Sainsbury - Cash ISA 2.80% £500 Allows transfers in, no introductory bonus, keep an eye out for any change during the year at any time.

 

Best Current Fixed Rate ISA's (1 Year)

Financial Institution Interest Rate Fixed Period Minimum £ Comments
Metro Bank 3.25% 1 Year £1 Allows transfers in. Early withdrawals allowed subject to 180days loss of interest.
Aldermore 3.2% 1 Year £1000 Allows transfers in, small bank.

 

Best Current Fixed Rate ISA's (2 Year)

Financial Institution Interest Rate Fixed Period Minimum £ Comments
Halifax 3.7% 2 Year £500 Allows transfers in. Early withdrawals allowed subject to 180days loss of interest.

 

Which ISA ?

The best instant access is from the AA. However the best for consolidating your existing instant access and maturing ISA's into one account is Virgin Money Easy ISA. Which is something savers should seek to do as larger balances can attract higher interest rates (stay within compensation limits).

Of the 1 year fixed rates, Metro Bank just tops the market, with the 2 year fix coming close to matching official inflation at 3.7% from the Halifax. Longer-term fixes are available, for instance BM Savings offers 4.25% for a 5 year fix, but this rate compares against their 5 year non ISA bond which pays 4.65% which illustrates the trick of under paying Cash ISA savers, which over 5 years would amount to a very significant difference in interest paid.

The bottom line is that no matter which Cash ISA you pick, you are still going to have between 1.5% to 2% of your wealth stolen per annum as a consequence of the Inflation stealth tax (RPI 5%). Which means over the long-run, unless you can time Fixed Rate investments when rates are high (last during 2008), then you are 100% guaranteed to have your wealth stolen, so you really do need to contemplate taking risks with your capital which means taking a look at corporate bonds, dividend stocks and other inflation hedged investments such as property, for at least then you will have at least a chance of preserving the value of your wealth in real terms - For more see the Inflation Mega-trend Ebook (FREE DOWNLOAD).

Summary of ISA Rules & Benefits

  • The ISA accounts are TAX FREE, and do not have to be entered onto any tax returns. The equivalent taxable return on a 3% cash ISA for standard rate tax payers is 3.6%. For higher rate tax payers it is 4.2%.
  • The income from tax ISA's does not count against many mean tested benefits such as Tax Credits.
  • The Allowance for 2011-12 is £10,680, £5,340 for cash and £5,340 for shares ISA's or the whole £10,680 into a shares ISA.
  • You can only open ONE New cash ISA per tax year, and you can add new monies to One Cash ISA per tax year (see transfers). Similarly you can open only one new Shares ISA per tax year.
  • You do not have to open a Cash ISA with your existing provider, i.e. you can open an account at different providers every year.
  • Most providers allow for transfers in. And ALL should allow you to transfer out.
  • Once you withdraw from a Cash ISA you cannot then then re-deposit into. The £5,340 limit refers to total deposited, and not maximum account balance. So if you deposit £5,340, and withdraw £1000, then you cannot re-deposit that £1000 in the same tax year as you have used up your £5,340 deposit limit.
  • To maximize your tax free interest, it is best to open your account at the start of the tax year.
  • The Financial Services Compensation Scheme (FSCS) guarantees the first £85,000 (Euro 100,000) per person, per institution. Those with sizable savings that total more than £85,000 should ensure that their institutions really are separate, especially given the banking crisis forced mergers.
  • There is the facility to transfer Cash ISA monies into Shares ISA's but NOT from Shares ISA's to Cash ISA's .
  • Next years Cash ISA allowance (2012/13) will increase inline with inflation to £5,640.

Source and Comments: http://www.marketoracle.co.uk/Article32819.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2012 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.

Stocks Stealth Bull Market Ebook DownloadThe Interest Rate Mega-Trend Ebook DownloadThe Inflation Mega-Trend Ebook Download

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

BARRY COLLISON
07 Feb 12, 06:30
CASH ISA

I recently put £3000 into a nationwide cash isa. I tried to top it up by transferring another £2340 into it, but they would not allow it after 30 days. The question is can I open another cash isa with another bank for £2340. Can you have 2 seperate isa'a in the same year as long as you are below the limit.


Nadeem_Walayat
08 Feb 12, 17:53
Cash ISA

No

You can only open ONE cash isa per tax year.

So you cannot deposit any more into another cash isa (does not include transfering existing isa's).

Best


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules