Entertainment For Lively Minds
ISAs are cr@p
It's that season where all you see is ISA ads. I signed up for one a few years ago which I knew was for a small amount (I think I got wine vouchers for setting it up IIRC). So I called them up yesterday to see what was in there, and found that I had put £90 in in 2005 and its value today is....£88. Explanation: I had selected at FTSE tracker and the stock market had done very badly in that period. Total BS! It did have a shock in 2008 but has recovered pretty well since. People put their life savings with companies like this!
I also had an ISA for larger amounts with a major bank and hadn't checked its interest rate until last year, only to find it was something like 0.01%. Maybe I am unlike most people who monitor these things closely and are forever moving money around, but I doubt it.
Buyers beware!
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caveat emptor indeed
it sounds very much like your ISA-in-decline is not a straight cash savings account ISA, but a stocks & shares ISA, so the money doesn't just sit and get interest added every year, it's effectively invested in the stock market instead ...
this means - cliche alert - its value can go down or up, or plummet in exciting fashion ... depending when you took out the ISA in 2005, it's quite possible that it's worth less now than then since the FTSE100 has fallen and ralled since...
as for the cash ISA (really just a savings account where you don't pay tax on the interest), i am utterly livid that this 'tax free savings vehicle' which was supposed to encourage the hoi polloi to put aside £££ for a rainy day has been pissed all over by banks who have cut rates to levels that are beyond satire ... if you have a few hundred stashed for an emergency it probably doesn't matter, but if it's a vehicle for regular savings and the magic of compound interest over decades then, you really do have to scrutinise it with a fekkin big scrute every 6-12 months these days ...
Yes...
...and the stocks and shares ISA almost certaily will have annual fees.
Next week is the time to change your cash ISA. The one I have drops from 3.5% to 0.5% next week. I have to close it and open a new one...in the same feckin' bank... to get this year's rate, which is just over 3%. I can do this because I have less in the ISA than the max allowed. If I had more than the max allowed, I couldn't do it because the ones with the best rates don't allow transfers.
My son has a cash ISA because he's saving up for a car. It's an instant access one, and he takes money out and puts it back in as required but generally there's been 3 grand in it all year. He got £3 interest.
Fuckin' unbelieveable....you give the bank 3 grand for a year, which they give out to folks for a fee, gamble it etc...and they give you £3 back.
....and breathe.
Please remember that...
... if you have money in an ISA - you are avoiding paying tax. Which makes you, officially, a *bad* person.
Officially
tax avoidance has been seen as acceptable both by this and the previous government, particularly for certain businessmen.
I'm still smarting from having the value wiped off my B&B shares by the government who then handed the profitable side of the business over to Santander.
Santander, who although offering some of the best ISA rates lets them drop like a stone after 12 months, and who took 2 months to credit my account after an ISA transfer.
Perversely
there are taxable saving schemes out there that pay better interest after tax than an ISA does, even though untaxed, go figure. The only way to get a good rate on an ISA is to invest long term, 3-5 years, but this may not be attractive as a concept. Instant access ISAs are NBG, except as a place to stash your cash, rather than under the mattress.
Bad timing
I bought a stocks and shares ISA on September 4th 2001 and went off on holiday. By the time I got back, just over a week later, I'd lost hundreds, and it took years to get it back to where I started, only for it to drop like a stone again with subsequent crashes.
Mind you, after almost 10 years, even with the latest fluctuations, it's now up to around 1.5 times its original value so if you can afford to wait ...
There are times when it is quite useful
to check what it is you're doing before you actually do it. An Equity ISA has gone down in value? Quelle surprise! Shares can go up as well as down...
The business about banks making you transfer from one account to another, else the interest rate drops to sweet FA, is the issue that hacks me off. I put this to my bank last year, with a comment about it making me look around to see if there was a better deal anywhere else, and the reply was a nonchalant shrug of the shoulders and a comment to the effect of, "We don't really care... it's like mobile phones, we know there's going to be a lot of customer churn. Plus it means we see you once a year and have a crack at selling you something else"
And don't forget that the "financial adviser" they'll try to get you to see is just a better trained salesmen whose only selling their own products and can't comment on other companies offerings. For that, you need an independent adviser...
The selling annoys me too
Before the Internet I was wary about buying something without much research. Now I can find out all the details before I buy, why should I listen to a salesperson that only really knows about the stuff they're selling?
I don't understand the willingness to allow churn either. There is very little loyalty these days so people shop around (indeed up until the beginning of this year, as soon as you had £50,000 in one bank/bsoc you needed to find another one for the rest of your savings). I hate doing it, it's not just banks, I've got a 24 month phone contract so I won't need to do that this year and none of our ISA bonds mature this year so we're spared that. I've already had the hassle of moving my car insurance (I've saved £100 by going back to the one I left last year as they're treating me as a new customer!).
Whenever I ring anyone up I always tell them that they don't even have to match their competitors rates, just get close so I don't have the hassle of moving but they rarely do so I vote with my feet.
I'm sort of with Mark JF here...
There are three basic rules when investing in an ISA:
1. Don't invest in a cash ISA through a high street bank - they are little better than a standard savings account, usually tied to a low interest rate and unlikely to save you from any tax liability unless you hold a large amount of cash in it for a VERY long time.If it's simply a depository for a short term period while you save for a car etc., open a National Savings account and forget you ever heard the acronym.
2. Do your homework. The Individual Savings Account is a useful investment scheme if you have a large lump sum to invest and can afford to leave it there for a MINIMUM of 5 to 10 years (don't be fooled by the advertising - equity investing is long, long, long term, not 3 to 5 years - in other words, if you can't afford to lose it, DON'T INVEST IT), and only invest in stocks, not cash.
3. ~ALWAYS see a financial adviser first. Forget the word 'independent; when the RDR regulation goes in in January 2012, the word will become redundant - just make sure you choose one with a good reputation. As someone who works in the investment industry for an asset manager (NOT a bank), it annoys me that so many people on here seem ignorant of the amount of help and information that is available to them prior to making the choice to invest, either from the FSA or their adviser.
For the record, the investment industry is subject to more regulation in favour of the individual investor than any other industry in the country (for example, your investments are guaranteed safe from loss up to approx. £50k if it's found that the Adviser or product provider is a wrong 'un) and financial advisers are highly qualified - it doesn't do them any good if your investment fails, so whatever the press says, and taking into account that their are bad apples in every tree, they are there for you.
Buying an investment is the same as buying anything else. Shop around, work out what you can afford and what you can afford to lose, work out how risk averse you are and read up as much as you can about what will happen to your money before you invest it.
The choice is then up to you. Don't whinge if you then leave it there un-monitored for 3 years and then find out it's all gone. It takes effort to understand how the market works and what it can do for you. Anyone thinking it's a 'dead cert' hasn't done their homework, and if you haven't done your homework, you're not likely to get good marks.
On a shallow note,
and fully accepting that this is a crap ad (it's worked on the level that I now know the Halifax offer ISA's but I could probably have guessed that before), but anyway, she's rather attractive isn't she?
My ISAs are all with Fidelity.
They are based on a pretty mixed portfolio and, with the exception of one, are all doing well. They are a long-term investment for me which will be used to fund my little 'uns schooling. M. Oeuf offers the same advice that I was given.
Wonder if I'll be able to afford to get the cat out of pawn?
Your cat's a pawn star?
...