Which is the best ISA?

If I'm honest ISA's really confuse me. There is a lot of technical language (jargon to me) and I'm doing my best to try and learn it. Then each ISA has it's own merits and drawbacks and the hardest part is finding the right ISA specifically for me.

I'm happy to leave my money in an ISA and can't take it out if it means I'll get more money at the end of it.

Some ISA's I've found are:

Government Lifetime ISA: https://www.gov.uk/lifetime-isa

Paragon Bank 5 year Cash ISA: https://www.paragonbank.co.uk/savings/cash-isas/five-year-fixed-cash-isa?utm_source=money-co-uk&utm_medium=Table-listing&utm_campaign=five-year-fixed-rate-cash-isa&utm_content=best-buy-table#

Aldermore Fixed Rate Cash ISA: https://www.aldermore.co.uk/personal/personal-savings-accounts/cash-isas/fixed-rate-cash-isas/?utm_medium=affiliate&utm_campaign=10806&utm_source=7&dclid=cpkemz-v1tkcfcmngwodbvujnw

Charter Savings Bank Fixed Rate ISA: https://www.chartersavingsbank.co.uk/Products/ISAs

Nationwide BS Single Access ISA: https://www.nationwide.co.uk/products/savings/single-access-isa/features-and-benefits

My current account is with Nationwide. I have about £7.8k in my account. I save £800-£1000 a month.

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Reply 1

dylantombides

ISA's are so confusing!

Reply 2

Dez

Consider what you're saving money for. You may want to use more than one savings account, depending on what you want to do with your money.

A Lifetime ISA is designed to help you towards saving to buy your first home, or to save for retirement (though it's not necessarily a good thing to use for the latter). You are limited to only paying in £4,000/year into a LISA, considerably less than the standard yearly ISA limit. However, you recieve a 25% bonus on any payments you make from the government. If you're saving for a house a LISA may be useful to you.

Most cash ISAs are essentially the same just with different restrictions on what you can withdraw, and with different payouts of course. Working out which one is best really comes down to number crunching, based on how much you're planning to pay in, and when.

Have a look at interest rates on current accounts too. Some of them offer you better interest than ISAs do and if your savings amounts are relatively small, you won't be taxed on the interest anyway.

Reply 3

dylantombides

Original post by Dez

Thank you.

The number crunching is where it gets confusing. I have about £8k to put in so not sure which will be best for me personally.

Reply 4

username1207499

If you’re willing to leave your money in the ISA for at least 5 years then you can look at stocks and shares ISAs and investing in multi manager mutual funds. In that case you can generally look at an amortised 10% interest annually

Reply 5

dylantombides

Original post by D3LLI5

Are stock still and shares ISA's risky? Ie there's a chance I could LOSE money rather than making it?

Reply 6

username1207499

Original post by dylantombides

Are stock still and shares ISA's risky? Ie there's a chance I could LOSE money rather than making it?

If you’re stock picking yourself then yes, if you’re investing in multi manager mutual funds then it’s very unlikely. This is assuming you don’t take any money out in 5 years or more though, if you have to take money out before then you may end up losing money since the value of stocks goes up and down

Reply 7

Dez

Original post by dylantombides

Are stock still and shares ISA's risky? Ie there's a chance I could LOSE money rather than making it?

A low-risk managed fund should not lose you money over the long term. You definitely need to keep the money invested for a minimum of 5 years though, as D3LLI5 says you can lose out in the short term but over time you're likely to see a decent return.

Reply 8

Thomazo

Original post by dylantombides

Are stock still and shares ISA's risky? Ie there's a chance I could LOSE money rather than making it?

Put your money in an index fund and KEEP IT there! It may go down or it may go up on a short term basis but with index funds it ALWAYS goes up in the long run. Over the last 50 years the US one has yielded around 10% per year.

As long as the market keeps rising over time, you will basically get your share of it.

I wouldn’t go for a mutual funds as it has higher fees and often won’t beat an index fund anyway.

Picking stocks yourself is not advised unless you are an expert at investing.

Reply 9

dylantombides

If I'm honest, this thread has made me more confused on ISA's (and related savings) than before!! I'm really not sure which is best for me now.

Reply 10

ch0c0h01ic

Original post by dylantombides

If I'm honest, this thread has made me more confused on ISA's (and related savings) than before!! I'm really not sure which is best for me now.

What are you saving for? University? A house? Retirement?

It depends on what you are saving for and your timescale as to what is best in your situation (eg; easy access savings vs ISA vs S&S ISA vs SIPP).

Reply 11

Quady

Original post by Thomazo

Picking stocks yourself is not advised unless you are an expert at investing.

Why?
And what would make one an expert?

Reply 12

dylantombides

Original post by ch0c0h01ic

A house - I'd like to have moved out in 2 years.

Reply 13

Thomazo

Original post by Quady

Why?
And what would make one an expert?

Because you most likely won’t beat the market. It’s too difficult to predict in the long run.

Of course it can be done, but most likely you will fail. So an index fund which follows the market is your best bet.

Reply 14

Quady

Original post by Thomazo

Oh right.

But surely then you're forced to invest in every component of the index? So there are ethical considerations.

Buying an index tracker means you don't get shareholder perks.

Buying an index lowers your income generation potential.

No?

Reply 15

Zerforax

Original post by dylantombides

A house - I'd like to have moved out in 2 years.

https://www.moneysavingexpert.com/savings/best-cash-isa

Here's a good article on cash ISAs

The reality is that due to the personal saving allowance (which allows you to earn £1000 (or £500 if higher earner) interest a year tax free. The amount of £8000 won't get you near the threshold which means ISAs are not as useful as they used to be a few years ago. You can look at any kind of cash saving accounts as an alternative (for example Santander 123 account gives 1.5% interest and cash back on bills so long as you meet the conditions including paying £5 a month).

Since you want to buy a house, you should be looking at help to buy ISA

https://www.moneysavingexpert.com/savings/help-to-buy-ISA

Basically you can save £1200 to start and then £200 a month. You get better interest rate than a cash ISA and then government will add 25% to what you've saved when you use the money to buy a house which can be a great bonus.

The stocks and shares (whether you pick individually or track an index) are more risky so can go up or down. Ignore those people who make out like it is guaranteed return because it's not and the markets have dipped in the past. It's great if you have ultimate flexibility and can take out on a high but if you're stuck and forced to take out when markets are dipping then it's not great.

I had to take money out of a stocks and share ISA when the credit crunch hit and I lost money (about 10% of the value what I had started with) which was disappointing at the time. More recently I took money out of a passive tracker in stocks and shares but I was up 25% (timed it when the currency dipped which increased the value of it). It sounds like you are not willing for that level of risk though.

I'd suggest you look into the Help to Buy ISA and then open a second account (just a high earning current account) to save the rest away for now and then you can slowly transfer over time into the Help to Buy ISA.

Reply 16

Quady

Original post by dylantombides

A house - I'd like to have moved out in 2 years.

Cash lifetime isa then

Reply 17

Dez

Original post by Quady

But surely then you're forced to invest in every component of the index? So there are ethical considerations.

There are investment funds you can buy into which are considered ethical (i.e. no arms trading or other nasties in them), though you obviously lose some fine-grained control as to what actually meets the definition of "ethical".

Original post by Quady

Buying an index tracker means you don't get shareholder perks.

Yes you won't get any perks but chances are those wouldn't amount to much anyway, I think. Unless you're investing quite a large sum of cash.

Original post by Quady

Buying an index lowers your income generation potential.

Your income potential is lower yes but it also massively mitigates risk, as well as involving a lot less work. Time is money, if you're spending hours and hours learning how to invest and continually managing your portfolio, how much are you effectively being paid per hour? Unless you're dealing with a large sum, probably not much.

Of course if you're interested in trading as a hobby then the time=money thing is not so much of a concern, but for your average Joe it's probably not worth their time to try and go it alone.

Reply 18

robc2

Help to Buy (ISA) if you're looking to buy a house in the medium - long term future although I'm not sure if they are only available in Scotland?

For every £200 that you save (maximum monthly deposit, although you can put in up to £1,200 in the first month), the Government will put in £50 (25%) up to a maximum of £3,000.

Some lenders allow you to withdraw at any time without charge however you obviously won't get your government bonus on this amount. And to get the bonus you must be putting the whole amount towards the deposit for a property.