Written by Karen Bryan
Update 21 March 2014 – From I July 2014, the New ISA (NISA) will have an annual limit of £15,000, which can used wholly for for Cash or Stocks & Shares, or a mix of the two. Plus, you’ll be able to transfer either way between Cash and Stocks & Shares accounts.
With just over three months until the new ISA year starts on 6 April 2014, it’s a good time to start thinking about how you’ll use your tax free ISA allowance.
You will be able to invest up to £11,880 in a Stocks and Shares ISA and up to £5,940 in a Cash ISA.
I’m increasingly frustrated that the Cash ISA annual allowance is half that of the Stocks and Shares ISA; I can’t see any justification for penalising people who choose to keep their savings in cash versus stock market based investments.
I’ll be on the lookout for the highest rate new Cash ISA accounts from 6 April 2014. We did the right thing by opening new three year fixed rate Cash ISA accounts on 6 April 2013, as the rates of interest paid started to drop soon after.
My husband has an older three year fixed rate Cash ISA maturing in April 2014, so we’re crossing our fingers that interest rates have started to creep up by then. Annoyingly, many of the best rate Cash ISA accounts only accept subscriptions for the current tax year; so, we may be able to get a higher rate of interest on our new Cash ISA accounts, than on his maturing account. I think that the UK Government should force all financial institutions to offer the same rate of interest for new and old Cash ISA savings.
I’ve only ever had Cash ISAs, as I felt that I had enough exposure to the stock market through my stakeholder personal pension. However, as I plan to buy an annuity with my pension pot in Spring next year, am I tempted to open a Stocks and Shares ISA, to use that additional £5,940 tax free ISA allowance?
Probably not, as I find it impossible to predict which shares or funds would give me a good return. It was quite unnerving trying to judge when to sell my stock market based personal pension funds, in order to put them into a safer cash fund to lock in the gains prior to buying an annuity. So, I’m not feeling like any more forays into the stock market in the near future.