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ISA takes the cake - 140307
Quick! Quick! Don’t miss the ISA deadline! If you wait until April 6 you'll, well, still be able to invest up to £3000 in a cash ISA or up to £7000 in an investment ISA. Mmmm...
So where's the deadline? Surely there must be one? After all, personal finance columns in newspapers not to mention adverts from banks and insurance companies all warn us not to miss it!
If you miss the auctioneer's eye the item has gone to someone else. If you miss the self-assessment tax deadline you are fined £100. Ditto if you miss the deadline for returning to your car in a parking bay. But the ISA deadline is different.
Each tax year you can invest up to £3000 in a cash ISA or up to £7000 in an investment ISA (or a mixture of the two) so once the tax year ends at midnight on April 5 you lose this year’s allocation. But if you have got £7000 waiting to be invested you can still use next year's allowance once April 6 arrives one minute later. The only people who really face a deadline are those who (a) have not used up this year's allowance and (b) have got enough spare money to use it up and next year’s too. There are not many of them about.
Last week ISA wars really broke out for our cash with Alliance & Leicester offering 7%, Abbey trumping that with 8%, A&L replying with 8.1% and then Abbey raising to 8.1% as well. But in the complex world of ISAs all is not what it seems. Abbey's Super ISA only gives you 8.1% on half your money for a year. After that it reverts to probably around 5%. The other half has to go into a stock market linked investment which promises 9% (hooray!) but over three years (boo!) and that is the equivalent of 2.9% a year. Even Abbey admits that could mean a net return over three years of 4.49% which is, to be blunt, rubbish.
Alliance & Leicester makes you open its second-best current account, paying in at least £500 a month and earning – wait for it – 1.5% on the balance. And then you can apply for its 8.1% Premier ISA. But that rate is not guaranteed. It could fall to 6.25% at any time and will fall – probably to 5% – at the end of April 2008.
I have railed against complicated deals from banks before – and no doubt will again – but you should treat the ISA season with the same disdain wine experts show the arrival of Beaujolais nouveau. Marketing hype to sell a mediocre product to gullible consumers. If you want a cash ISA and have at least £1000 to put in then it is hard to beat National Savings & Investments at 5.8% with no strings and no special bonus. If you have less than £1000 or an ISA to transfer go for Kent Reliance at 5.71%.
* Award-winning financial journalist Paul Lewis writes the 'Lewis on the web' column every week for Saga's online Money zone. He also writes the popular Money News and Money Works columns every month in Saga Magazine and presents Moneybox on BBC Radio 4 every Saturday.
Paul's views represent his own opinions and are for general information only. Always seek independent financial advice.
This article was created: 14 March 2007.
This article was last edited: 22 March 2007.
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