Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

© 2005-2022 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