Holding maxi ISAs / PEPs as cash / low risk investments

The IR rules are vague - I don't believe anyone has had an ISA voided so there is no precedent. E*Trade used to hassle me all the time until I sent them a reply stating that I had every intention of investing when a suitable opportunity arose. They then stopped hassling me. I've had about 10K in cash for approx 6 months now.

Gilts.

Near idea here -

E*Trade are crap as well -

Cash Balance Interest Rate (Gross) £1 - £9,999 0% £10,000 - £49,999 0.1% £50,000 or above 1.5%

Daytona

Not really low risk (more medium) and not necessarily very liquid, but you could consider an ISA from an investment trust that moves from equities into cash when things look iffy in the stock market. Personal Assets (about 30% cash last time I checked) and British Empire Securities spring to mind.

Thom

There is no hard limit, but more than six months and your provider will probably start complaining unless the cash fraction is fairly small. Also the one remaining difference between PEPs and ISAs is that interest on cash in a share ISA is *not* tax-free - so I hope you've been declaring it on your tax form!

Gilts or high-grade bonds, although I think they must have at least 5 years left to run when you buy them. I would also argue that there are plenty of shares with relatively high yields (4% +) which are fairly unlikely to cut their dividends in the forseeable future, but obviously there is a capital risk there.

... ...

Hi Daytona, Thanks for the info re LSE:RBSA shares (Royal Bank of Scotland Additional Value shares). Seems to be just what I am looking for.

Current offer price is 59p. Assuming 55p is returned in approx 30 days and the tax credit of 6.1p approx 120 days later, my calculator tells me that I will get quite a decent rate of return. (I have ignored the dealing charges as these are insignificant for the amount to be invested.)

Seems too good to be true. Can anybody think of any catches ? Have I missed something.

Ex-div date is 12 Nov, so I have only a day to act. Prompt responses greatly appreciated. Cheers, Adam

err sorry, your fears had been raised (and laid to rest) by others on various forums (including here & TMF) so hopefully you found that. I've just had the novel experience of looking up my ISA valuation and seeing a huge loss as the shares are now down to 0.75p (why? they're worthless!).

Daytona

Just been browsing the IR bible for PEP & ISA administration - "Guidance Notes for PEP and ISA Managers"

"ISAGN10.33 - Managing a PEP or ISA: Cash held temporarily in a PEP or a stocks and shares or insurance ISA PEP Regulation 17A(2)

Cash may be held temporarily in a PEP or the ISA stocks and shares and insurance components, pending a suitable investment opportunity. But in the case of a non- discretionary PEP or ISA where

- a substantial amount of cash is held with no apparent intention of investing in other qualifying investments, or - cash is building up because purchases of other qualifying investments are not using all the cash in the PEP or ISA

Managers should follow the procedures set out in ISAGN10.34 and ISAGN10.35."

"ISAGN10.34 - Managing a PEP or ISA: Reports to investors Where a report is sent to the investor, under the rules of the manager?s regulatory body, the manager should explain that

- cash may be held in a PEP or in the stocks and shares component and insurance component of an ISA only in order to purchase other qualifying investments the investor should instruct the manager to purchase other qualifying investments, and - if the cash is not invested the Inland Revenue may require the manager to return the cash to the investor, and in the case of a PEP, the investor may become liable to tax on interest arising on that cash."

"ISAGN10.35 - Managing a PEP or ISA: Reminders to investors If the manager has received no instructions by the time the next report is issued he should send a reminder to the investor."