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ISAs
Prof Eman
Posted: 24 March 2016 17:07:12(UTC)
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Got one or two ISAs maturing. Not sure what to do with them.Can tie up the money to a max of three years, but might need the money earlier. Options seem to be-
Keep as ISAs, renew, but interest rates very low.
Top up before 05/04 or after? In Isas or otherwise.
Cash in and do something else, top up as necessary. Needs to be a fairly safe investment.
Any suggestions?
geoffrey Walton
Posted: 24 March 2016 17:46:33(UTC)
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I wish we all knew the answer to that!

If the total value is under say £60000, you could put it in a Building Society/Bank Account at say 1.5%(ish) allowing you the new Tax free £1000 interest for say a year while you watch the rates etc. That would be about Inflation for the next 12 months, and your could get at the money, and not lose value
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Prof Eman on 24/03/2016(UTC)
Alan Selwood
Posted: 24 March 2016 21:03:50(UTC)
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Prof Eman;32162 wrote:
Got one or two ISAs maturing. Not sure what to do with them.Can tie up the money to a max of three years, but might need the money earlier. Options seem to be-
Keep as ISAs, renew, but interest rates very low.
Top up before 05/04 or after? In Isas or otherwise.
Cash in and do something else, top up as necessary. Needs to be a fairly safe investment.
Any suggestions?


Since ISAs are now very flexible, you can transfer from cash ISAs to Stocks and Shares ISAs and the reverse.
I find it very difficult to justify cashing in an ISA, because you lose the tax ring-fencing that you had spent time to achieve in the past, and even with the new tax exemption on interest up to £1000, who knows what legislation may be enacted in future years that will make you wish you'd kept the ISAs.


6 users thanked Alan Selwood for this post.
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Ian Holmes
Posted: 27 March 2016 08:53:26(UTC)
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I believe the new rules for ISAs from April allow you to take cash out of the ISA and not lose the allowance provided it is put back in the same tax year. This would give you time to assess the best place to put the cash and not have to make an immediate decision while leaving it in a normal bank deposit account (There's no tax on the first £1,000 annual interest from April)

What I would probably do though is transfer the maturing ISAs to a provider (which may be your current one but first check any exit/transfer fees applied by your new provider) which allows stocks and shares and cash combined. Then you leave your options open with no time pressure.......but I don't see cash rates improving any time soon, so maybe select a cautious managed fund for some of the cash if you are risk-averse. All IMHO of course.
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Prof Eman on 27/03/2016(UTC)
Alan Selwood
Posted: 27 March 2016 13:55:22(UTC)
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When I looked recently, not all ISA providers were offering the 'draw it out/put it back in' type of ISA, and it is almost certain that you will have to transfer your existing ISA into a new one that has been created to offer the new flexibility to withdraw then replace within the same tax year without loss of ISA shielding thereafter.
Naturally, the ISA tax exemption is lost during the period of withdrawal, interest earned needs to be reported, etc., so for my taste it would be too much fiddle.
4 users thanked Alan Selwood for this post.
Prof Eman on 27/03/2016(UTC), CUEBALL on 27/03/2016(UTC), martin hargan on 29/03/2016(UTC), Alan M on 29/12/2017(UTC)
Prof Eman
Posted: 27 March 2016 16:21:14(UTC)
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Thank you so far for your comments.
My thinking at the moment is something like this, based on cash/shares ISA.
Move some money into a guaranteed 3 or 4 yr bank type investment ISA wrapped, with a minimum gain guarantee, but which would give a decent return if the FTSE goes up.
One would need to time entry into this type of investment carefully, when the FTSE drops next say just before the referendum? Such a timing seems to me to be a good one based on the fact that the FTSE seems to go up just before/around election time. For example, 2005 elections FTSE moved from about 3.5k to 5k, 2010 from 3.5k to about 5.5k, 2015 from 6.3k to about 7k. Anyone with experience of this type of investment within an ISA wrapper? Or any comments to offer?
The added advantage of this type of investment is that you can sleep well without worrying about alerts.
CUEBALL
Posted: 27 March 2016 17:42:28(UTC)
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profer's give us an hours notice mate (when the ftse about to go up or down)....ta
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Guest on 30/03/2016(UTC)
Alan Selwood
Posted: 29 March 2016 11:49:54(UTC)
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Prof Eman:

I fear you still believe that insurance companies are in the catering business and offer free lunches!

The reality of the sort of financial engineering that underlies such schemes is that:
If they offer upside based on an index, it will be calculated on the cost to them of buying a derivative at a time of their choosing and based on an index level of their choosing. Something tells me that the customer pays for the cost, plus a margin of profit for both the insurance company and the issuer of the derivative.
If the index then goes down after they buy the derivative, you will be offered the increase based on the index when they bought, not when you bought.
If the index goes up after they bought, the above will also apply.
If they don't think a change in the index will lead to them making enough profit, they will close the issue, while if they would make more profit, they would extend it.

I have met far too many customers in the past who had been seduced by the similar concept of an unnaturally high income plus return of capital IF the index at maturity was over a certain threshold. They generally saw a savage CUT in their capital on maturity when the index fell below the stated level. As I said before, no free lunches!
Also, each layer of complexity throws more hidden costs on the customer - insurance companies do not like playing the role of generous uncle. They only PRETEND to be seen in this role, as it aids their profitability.

9 users thanked Alan Selwood for this post.
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Prof Eman
Posted: 29 March 2016 22:14:15(UTC)
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What about decent established Guranteed Capital Funds?
Alan Selwood
Posted: 30 March 2016 00:22:22(UTC)
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Prof Eman:

Can you give a couple of examples for fellow forum members to comment on? (Presumably the equivalent of a Guaranteed Growth Bond as issued in the past by insurance companies and nsandi?)
Prof Eman
Posted: 30 March 2016 09:45:07(UTC)
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They have been issued by banks in the past.
Prof Eman
Posted: 30 March 2016 16:02:42(UTC)
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kWIk SAVE
There is risk everywhere. But no one is expecting a major problem at the moment, particularly on the banking side.
Alan Selwood
Posted: 30 March 2016 17:25:54(UTC)
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kWIKSAVE;32225 wrote:
Dear Prof Eman

Stay well clear of guaranteed funds as the cost of the guarantee is normally excessive.

Anyway what does Guarantee mean .... think of Lehman Brothers/ AIG as counterparties.


This is precisely where the problems with 'Guaranteed Funds' lie.

You have to pay for the guarantees (including the costs and profit margins of the intermediary) while sacrificing the direct personal legal ownership of the underlying assets and thereby increasing the risk that defaults will cause financial loss. Even with supposed compensation schemes behind you, these could not afford to cover a huge default, and meanwhile they create a further cost to the financial industry's customers.

If you want better security for less money, why not buy a slug of a short-term to medium-dated index-linked gilt, a slug of a similarly-dated non-indexed gilt, a slug of cash deposit and a slug of a global investment trust. Between them, these will stabilise the outcome in the event of rising or falling inflation and interest rates, rising or falling global growth, and the only thing then lacking is protection against hyper-inflation. To do this you need to add gold as well.

To do all of the above in one package, buy Trojan Income and Growth, or Personal Assets Trust instead.

Hope that helps.
5 users thanked Alan Selwood for this post.
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Prof Eman
Posted: 31 March 2016 10:02:45(UTC)
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My thinking was that if you do not have to actively manage your funds through a guarantee, you can use the time saved to make money elsewhere or for other purposes, say even leisure, and secondly it is not unusual to pay for expertise IF you can get it.
The real question is - Are banks safe enough?
One approach could be to bank with more than one bank to keep within the £75,000 guarantee limit.
Another approach could be to consider property investment, or even buy to let. Although entry at this point could also be questionable, and buy to let requiring some time and effort.
Any comments on the above?
Alan Selwood
Posted: 31 March 2016 13:00:33(UTC)
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The problem with guarantees is that they cost money, do not always work (major upsets may drain the reserves held to cover guarantees and so not be sufficient to meet all funds supposedly guaranteed), and governments can move the goalposts after you have made the investment that might need the guarantee.
Then there is the 'moral hasard' problem: if a guarantee is offered, the consumer stops doing a proper level of due diligence. Best to invest as if there were no guarantees, and be prudent in selecting good diversification of your assets from high-quality providers, so that guarantees should not be needed.

Using supposedly guaranteed funds as a time-saver does not strike me as a sensible motive. If you're going to rely on something, you need to devote time and effort to it! It's like supposedly lucky sportsmen - they make that luck by working at it till they become proficient.
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Alan M on 29/12/2017(UTC)
Alan Selwood
Posted: 31 March 2016 15:52:03(UTC)
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kWIKSAVE;32265 wrote:
We have now strayed from ISAs to buy to let !

With the changes in stamp duty to BTL properties about to bite, Dear Prof Eman, you should do your sums very carefully.

Personally I would avoid BTL with all the running costs and sometimes uncertainty about tenants respecting the place, void periods etc.

You are right to think about the 75K cap though.


I can think of few investments more removed from the idea of time-saving than buy to let!

Funding, reading up about all the regulations governing properties where let out, maintenance, record-keeping for tax purposes, finding tenants, evicting those who cause damage, insurance..........

K.I.S.S. applies here!
Prof Eman
Posted: 01 April 2016 20:28:00(UTC)
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Alan Selwood and others
There are some GUARANTEED returns to be had from banks based on cash holdings and FSCS
For example- £4 to £5k at 4% Club Lloyds A/c subject to two monthly DDs.
Santander 1 2 3 A/c at 3% up to £20,000.
There are others with lesser rates of interest.
Many beat the 1 to 1.5 % on ISAs, particularly if you are in a position to utilise your £1000 interest allowance.
One needs to take other charges into account, but a useful starter if you want to hold cash in uncertain times.
jeffian
Posted: 29 December 2017 10:53:39(UTC)
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I didn't want to start a new thread but, on the subject of ISA's, I saw a comment somewhere on the forum suggesting that under the 'flexibility' rules introduced by the Government from 6/4/16, sums withdrawn from an ISA could be replaced during the year without losing tax-empt status, and that this may also be applied to income withdrawn. I have asked my own accountant for a definitive view on the rules (though all comment here welcome!) but I have since discovered that my provider, HL, do not offer 'flexible' ISA's anyway. Is this just an administrative matter or are 'flexible' ISA's different to normal stocks & shares ISA's?
Sara G
Posted: 29 December 2017 11:19:36(UTC)
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A flexible ISA is a different vehicle because the provider has to track deposits and withdrawals. The following explains the process in more detail:

https://www.bsa.org.uk/B...0-8e42-0dfd42ff6608.pdf

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jeffian
Posted: 29 December 2017 12:41:49(UTC)
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Thank you, Sara. I have since heard from my accountant that withdrawal of cash from dividends should qualify for replacement in a flexible ISA provided the dividends are paid into the ISA first and not mandated directly to the holder's bank account. I now need to find a 'flexible ISA 'provider who would do it. As my family is constantly moving investments from outside their ISA's into them each year, but we take the dividends, it would be a useful way of increasing the amount we can transfer each year over and above the annual allowance.
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