NISA vs Current

[RenesisEvo]

Going round in circles on this one so I thought I'd ask the PH wisemen. My ISA rate is about to drop to nearly nothing, so it's time for the annual shop around. Once again there's a pitiful offering to house my savings - 1.5% at best without locking it away - and interest rates aren't likely to go down so I'm not keen to trap it away. I'm weighing up keeping the (N)ISA going, versus bunging the lot into a Santander 1-2-3 account, where even the £2 monthly fee and loss of tax-free gains is outweighed by the additional interest I would earn.

It seems like the most profitable place to stick my cash short of investments, but do you agree? I can't find enough information to make me confident about trackers or other medium-term options; I'm saving for property (not as investment per se); another reason not to go for longer term fixed rates. No debt to pay off other than a student loan; I want to be able to pay in regularly.

What happens if I do leave the ISA, is it simply a case of losing potential tax-free interest (which seems academic if the earnings are lower), or are there any more shortcomings I've overlooked, any longer term tax implications? I'm also concerned about the safety of having savings and cash in one pot, accessible via one card, one account number, although getting a 1-2-3 credit card may help mitigate that a little.

Has anyone done similar? How did it work out for you?

TIA

[Jon1967x]

The Santander current account interest is stepped and capped to 20k. 3% gross is about half that net for a high rate tax payer and available as a nisa. Take your money out of a tax shelter and the shelter is gone for good. Does not make sense to me for cash savings

Investing in other things is a personal question on risk or locking the money away.

Edited by Jon1967x on Friday 19th September 08:03

[RenesisEvo]

Jon1967x said:

The Santander current account interest is stepped and capped to 20k

I'll get the highest rate; it's likely I will exceed the cap at some point, anything above that can then go into an ISA.

[Jon1967x]

RenesisEvo said:

Jon1967x said:

The Santander current account interest is stepped and capped to 20k

I'll get the highest rate; it's likely I will exceed the cap at some point, anything above that can then go into an ISA.

If you're not a higher rate tax payer and don't have long term plans to accumulate a tax free shelter then fine. if you're just looking at this years allowance then the difference in interest after tax is maybe only £50 in favour is the current account

[Qwert1e]

IMO at current interest rates cash ISA/NISA is a complete waste of time. In other words, the tax relief on almost nothing is almost nothing.

ISA/NISA is much more effective when used for investments like unit trusts. Over time you will get tax relief on both the dividends AND the capital gain. Good stuff.

[FreeLitres]

Decent NISA rate of 2.75% featured on Money Saving Expert. Transfers in not allowed though:

Grab an up to 2.75% cash ISA fix - with access to your cash. Unless you'll definitely need the cash soon, you can earn more with a fixed-term, fixed-rate cash ISA. By law, they must let you access your cash, but can have strict conditions and charge penalties to do so. Let's get clever...

- Coventry BS's 4-year 2.75% fixed cash ISA (min £5,940 - no transfers) lets you withdraw early by closing the account. The penalty's a relatively low 120 days' interest. So close it after a year and you'd still effectively have got 1.85%, beating most easy-access deals. After 2 years, it's 2.3%, beating the best 2-year fix; after 3 years, 2.45%.