Should I Keep My Cash ISAs?

Written by Karen Bryan

My four year fixed rate Cash ISA with the Coventry Building Society matures soon. I am swithering over whether to retain the tax-free ISA status of this tranche of savings.

The issue is that, for a number of years, the rate of interest paid on many Cash ISA account has been lower than that rate paid of standard savings accounts.

At present, I don’t require the tax-free Cash ISA status, as all the interest which I earn from savings accounts is tax-free. This is through a combination of my earnings and annuity being below my annual personal allowance, using the £1.000 annual tax-free Personal Savings Allowance and the up to £5,000 Starting Rate for Savings allowance.

However, looking to the future, if the interest rates paid on savings do ever finally increase, and if I am still working when I start to receive my State Pension in 2025, then I could be liable to pay tax any interest earned from standard savings account above the £1,000 PSA.

It’s hard to know the level of the annual personal allowance by 2025. In the recent past, the annual increase have been higher than the rate of inflation, but that has not happened in the current tax year.

I am also unsure about future annual increases in the State Pension.

I would hate to start paying tax on interest earned from my savings in the future,.

But in order to exclude this possibility by transferring all my savings into tax-free Cash ISA, I could still lose out ,by earning a lower rate of interest on the savings in these Cash ISA accounts, than I would in standard savings accounts.