isa and interest is it worth it?

If you're going to draw it all out after a year, there's very little point in opening an ISA - you might as well stick with what you've got, even though you have to pay tax on it.

In fact, if you didn't already have a savings account, you'd only be about

70 quid worse off if you put the money in a shoe box under your bed!

Cash ISAs come into their own when you put the maxiumum permitted (3,000) into them each year and leave it there for a few years - they're not very useful for very short-term savings.

In message , Tracy writes

I dont agree your arithmetic (*). I reckon you will have an extra 72.60 in the ICICI account after tax after one year and 82.50 in the 5% ISA.

The ISA gives you an extra 13% return. As the actual amounts are so small and as you appear to be wanting to maximise your return then why not take advantage of an extra 13%? If you feel such a bonus isnt worth it then you may as well just keep your dosh under bed.

Dont be fooled by ICICI 5.85%. In fact it is 5.51% per annum paid monthly and the compounding effect means you end up with 5.85% per annum more than you started with, so your spreadsheet needs to be based on

5.51, not 5.85.

National Savings are offering 5.8% which accrues daily but which is paid annually so the AER is the same at 5.8%. This MUST be a better deal than ICICI.

(*) = very soon somebody with the initials RR will post a message saying I am wrong as well.

How do you work that out? My pocket calculator reckons that 5.51%pa paid monthly compounds to 5.65%, not 5.85%. I think you want 5.70%pa.

So now 5.8% is the same as 5.85%? Tsk.

What do you mean "less tax"? Why not incorporate the tax deduction into the calculation? If the 5.85%pa compound corresponds to 5.70%pa nominal, or 0.475%pm, you need to deduct tax *at this stage* because if the lender adds interest monthly, tax is deducted monthly. So your after-tax rate is 0.38%pm compounding to some 4.66%pa.

I reckon that means you get £3075.14 after a year (assuming the year starts with your first payment and ends just before your 13th payment).

You'll need to explain how the difference between 3081.90 and 3069.71 is

6.83.

£9.56 worse than what?

If you put £250pm into a non-compounding account earning 5%pa (i.e.

0.4167%pm) then you will end up with £3081.25, I reckon. This is £6.11 more from the ISA, and if the ISA rate were 5.8% instead of 5%, you'd get £3094.25, an extra £13. So you're now up to nearly £20. A bottle of bubbly is not to be sneezed at.

Er, what hassle?

ISAs are better value if you keep them long-term. Saving money in an ISA short-term is sensible only if you have no other savings. And if you don't have those, it could be argued that you can't really afford a new car that will be so expensive that £3k is only the deposit. I suspect you should be looking at a car that's worth a t most £3k more than what you'll be able to get for your old car.

So spend it. You'll need to spend it anyway if you want to sell it. Either that or sell it now.

My mistake. the ICICI account actually pays 5.51 and the AER is 5.65%

Why?

No, NatSavings pay 5.8% gross and 5.8% AER.

You'd get up to 6% on an isa. If paying at £250 pm rather than investing whole £3000, it might only net you an extra £15+, so it's up to you if you think it's worth it. I just have to think of Brown's rictus smile, to go for the tax-free option as matter of principle.

Toom

Hehe, glad to see another capitalist here :-). If I could save a penny from the Socialist taxman, I shall do just that. It isn't the money but the principle of being screwed over to pay for a non-existent "improvements" to services (if anything they've gotten worse).

Did you hear that Gordon Brown would be presiding over his 100th tax rise soon? No wonder us plebeians are feeling the pinch left, right and centre.

skate xx

Yeah, it's been more of a Tax Blitz than a Tax Bombshell.

FoFP

Quite. Our Tracy seems to be getting a secret special deal of 0.2% extra.

By the way, is this a new fashion in ploys to retain customers and dissuade them from switching banks? If everyone offers secret bonus rates which aren't advertised generally, it's easy to see how the public could be misled on this. ING is another one, who seem to advertise their "normal" 4.75% rate widely, but their new 5.65% rate only to existing customers whom it is hoping not to lose.

Because 5.70%pa is to 5.85% AER what 5.51%pa is to 5.65% AER.

Sorry, I thought you were comparing NS to ICICICI, not NS to itself.

In message , Ronald Raygun writes

Yes, a modern phenomena. I cant see anything wrong with it.

Mistake by me there regarding the rounding of 5.698!

Ahh! I C! (geddit?)

I can. It should be "a modern phenomenon". I know English teaching is going to pot these days, but in your time, JV, I would have expected more. [OK, it's actually Latin from Greek, and not technically English, but YKWIM].

That apart, there is plenty wrong with secret marketing.

Your wit never [1] fails to amuse me.

[1] Well, rarely [2]. [2] Well, sometimes [3]. [3] Well, often [4]. [4] Well, usually [5]. [5] Well, always.

As a fellow-Scot, I agree with Gordon Brown in having no problem being both Scottish and British. Where we part company is that the only thing that would make me vote for Scottish independence would be having him as British Prime Minister.

Toom

But there were more than one of which the ING phenomenon is but an example.

:-)