ISAs - what's going on?

[V8mate]

We're into ISA season now, with financial institutions peddling their new products to the tardy of 2012/13 and the early savers of 2013/14. And the rates... are fking diabolical. They haven't been great for years, but they're worse than ever.

I don't understand why, with the stock market bathed in glory, the banks et al won't offer us these savings accounts with, as a minimum, an inflation-matching base-rate?

Can anyone clever enlighten me?

[davepoth]

Funds have money they need to put somewhere, and because bonds offer such rubbish returns at the moment it's all going into the market. It's probably a new bubble.

[ellroy]

Cash ISA rates are crap for the same reason all cash rates are crap, the amount of cash flowing in the system is huge at present due to Quantative Easing.

The banks do not need to get funds from depositors as they can tap up the BoE quite easily at a better rate.

Hence, they don't have to offer decent deposit rates on any accounts.

[ringram]

Which is why you would be insane to save cash.

There are plenty of corp bond funds and blue chip stocks yielding much more. So why bother?

[pteron]

ringram said:

Which is why you would be insane to save cash.

There are plenty of corp bond funds and blue chip stocks yielding much more. So why bother?

Because once you move cash from a cash ISA to a Stocks ISA you can never move it back?

[CaptainSlow]

Money is cheap at the moment and has got cheaper over the last few months. 3 month Libor ~50bps.

To be fair mortgage customers are seeing some great rates at the moment..sub 3% 5yr Fixed.

[bogie]

pteron said:

ringram said:

Which is why you would be insane to save cash.

There are plenty of corp bond funds and blue chip stocks yielding much more. So why bother?

Because once you move cash from a cash ISA to a Stocks ISA you can never move it back?

nope

but check the details on the ISA provider and most will pay small amount of interest on cash held in stocks ISA anyway ...when you sell you may not buy immediately

[ringram]

pteron said:

Because once you move cash from a cash ISA to a Stocks ISA you can never move it back?

Yep, and the downside is?

[V8mate]

ringram said:

pteron said:

Because once you move cash from a cash ISA to a Stocks ISA you can never move it back?

Yep, and the downside is?

With the stock market so strong at the moment, it's not a great time to move a cash ISA into a S&S ISA, is it?

[GTRStage1]

V8mate said:

With the stock market so strong at the moment, it's not a great time to move a cash ISA into a S&S ISA, is it?

When is a good time?

Most people are too scared to invest in a falling market...and most people are too scared to invest in a rising market thinking it is at the top.

The trend is your friend.

[ringram]

and who said you have to buy shares!?

Whats wrong with some 6% corporate bonds if you want less risk?

[Zigster]

ringram said:

and who said you have to buy shares!?

Whats wrong with some 6% corporate bonds if you want less risk?

Risk of capital loss on corporate bonds if (when) interest rates rise. I'm not convinced corporate bonds are a safe bet.

[RizzoTheRat]

I'm hoping to move house in the next year so it makes sense to keep money in relatively easy access cash ISA rather than tie it up in something with potentially better longer term returns. So a measly 2.5% for me.

[ringram]

Zigster said:

Risk of capital loss on corporate bonds if (when) interest rates rise. I'm not convinced corporate bonds are a safe bet.

Hmmm, given the state of the economy I see little downside in short term bonds.

“When evaluating the potential risks in the bond market, it is critical to remember exactly why bonds are an integral part of a well-thought-out asset allocation plan—to diversify the risk inherent in the equity markets. Simply put, while the fear of rising interest rates may be legitimate, a potential bear market in bonds is dramatically different from a bear market in stocks (or other risky assets). In fact, unlike stocks, where the common definition of a bear market is a 20% decline in prices, to most investors a bear market in bonds is simply a period of negative returns. And to date, the broad U.S. bond market has never experienced a –20% return. Indeed, it’s the magnitude of returns that is the key differentiator between bad periods for bonds versus stocks. For example, the worst 12-month return for U.S. bonds since 1926 was –9.2%, while the worst 12-month return for U.S. stocks was –67.6% (12 months ended
June 1932)."

http://www.vanguard.com/pdf/icrrol.pdf

[bogie]

the word "safe" and "investment" dont go together

safe is your money on deposit in the bank...being eroded by inflation

any kind of "investment" has a risk, you just need to minimise the risk and decide how much risk you want to take

no risk, no reward, for pretty much anything in life .....

[pteron]

I'm new to bonds - where do you find them and rank them?

[Sonofabeesting]

RizzoTheRat said:

I'm hoping to move house in the next year so it makes sense to keep money in relatively easy access cash ISA rather than tie it up in something with potentially better longer term returns. So a measly 2.5% for me.

Interesting point. I am moving this year as well and I have some money in an ISA. The rest of my money I am putting into overpayments of the mortgage. Hopefully all bases are covered with this approach!

[hornet]

I've always made a point of using my full cash ISA allowance every year, but have slowly been moving over to a shares ISA instead. For the coming year, the priorities are 1) maximum mortgage overpayment, 2) Shares ISA. For the latter, I'm primarily looking to beat cash, with a little bit reserved for riskier waters.

[RizzoTheRat]

I'm currently in the rather smug position of getting better interest on my current account (after tax) than I'm paying on my mortgage so I've not gone down the overpayment route.

[Tino]

santander offering 3.0% if you have an ISA ties to their 123 account(which is also paying 3pc up to 20k)