The ISA Rip-Off
It’s the cash ISA time of the year and I’ve just been looking at the rates. As to what an ISA is, it’s probably best summed up by this page in Money Saving Expert. Here’s the first paragraph.
A cash ISA is just a tax-free savings account. You don’t need to lock the cash away, many are easy-access. Each tax year EVERY person over 16 in the UK can put a new £5,640 in these accounts that pay up to 2.8%. And once in there, the money stays tax-free, year after year.
The rates are derisory and are very poor compared to what I get from Zopa.
Admittedly, there are tax advantages, but why can’t I get those with a peer-to-peer lender if I agree to lock my money away for several years?
The Anonymous Widower 
Don’t knock ISAs, they have provided many people with some but limited spare income a real opportunity to imprive their financial status in later life. A few years ago, the first ISA millionaires were announced. These were people who had taken the full ISA allowance since the start of the scheme (origianlly called PEPs). The tax free saving is quite significant when compounded over many years as the gains on gains are also tax free. The best ISAs are not the cash ISAs but those linked to the stock market. As a short term investment, then Zopa is probably better, but for long term savings the tax free status of ISAs is unbeatable and everyone who can afford it should take up the maximum allowance each year.
Comment by John Wright | February 21, 2013 |