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Thursday, April 30, 2015

Not such a Nisa Isa

Keep saving, keep saving
I’ve been noticing it for a while, the slow clandestine creep downwards of rates on cash Isa products.

I started off with 3.5 per cent more than a decade ago on an HSBC Isa. In the heady heights of 2006 I managed to wrangle 4.25 per cent from HSBC, before the mighty crash. By the time I’d recovered from redundancy and was back on my feet to start adding to my savings, I was not only getting about 0.5 per cent but also having to endure three compounded errors in a row (where HSBC had lost my cheques/applications).

From thence I switched to Leeds Building Society, which in 2010 was the only one offering anywhere near 3 per cent. Within a year, it was down to 2.5 per cent and then down to 1.75 per cent for two years.

Now the most I can get from Leeds is a 1-year fix on 1.5 per cent. Still better than my husband’s Barclays Isa which is less than 1 per cent.

So having decided in 2014 that I wanted to start with stocks and shares I invested with Hargreaves Lansdown and started building up a tiny portfolio, while my 2-year cash Isa lingered untouched in the hallowed halls of the Headrow.

Thus far, the 2014/2015 S&S has returned 8 per cent in total; some parts, like the proverbial egg, are better than others. I’m not worried. It’s an 8 per cent gain not an 8 per cent loss, and it’s still better than any cash Isa on the market. It’s also more than any costs I would incur if I pulled the plug.

But this is my Long-long-long term saving. I want something up to two years in case Mr K and I get sprogged up or decide to go on a tour of the Antipodes. So I had a look for cash Isas on t’interwebs yesterday and found that the best rate was one from Santander, for 2 per cent. However I had to be a 1,2,3 customer. Always a catch.

I have opted for 1.85 per cent from Kent Reliance, which is the third highest rate I could find. The second was with Julian Hodge but I got bored of all the click-throughs on the website while looking up how to invest, so I went with Kent Reliance. I have to say, it was all done online within about five minutes - a simple, smooth and clear process. You can’t beat that kind of ease.

Yet I am still left with a bitter taste in my mouth that cannot be (solely) as a result of slightly off milk in my coffee this morning.

I wish providers would stop calling an Isa of 2% a ‘Nisa’. It’s not nice. It’s barely palatable. It might look good compared to CPI but let’s look at RPI, shall we? Let’s consider seven years of below-inflationary pay rises across the UK (assuming a level inflation rate of 2.5 per cent).

True I don’t have to pay so much for sour milk or petrol (maybe I accidentally put petrol into my Gold Blend this morning? I was quite tired). But I do have (supposedly) quite a few more miles to go in this chassis and I need my money to keep pace with me.

What’s so nice about 2 per cent? Maybe I should have gone all out on my S&Ss Isa. Many people would tell me to do so. But I like having cash, I need a bit of a cash net and, if figures from Cofunds are anything to go by, so do a lot of people in the UK.

According to Cofunds, Money Market funds saw impressive net sales in March, which resulted in the sector placing third in the net sales leader-board in the first quarter of 2015.

Furthermore, data released recently by the Investment Association has shown that net sales of S&S Isas slumped to just £325m in the key January to 5 April tax year end period - the once-heralded ‘Isa Season’. That’s a 57 percent drop from the £756m in the same period last year and despite the previous government increasing the annual allowance.

So people are looking for a safer place for their money. Cash and cash-like securities are winning combinations for people looking for a tax-efficient investment.

Banks and building societies should be falling over themselves to woo this money towards them, with more competitive rates. At the moment they’re competing to see who can offer the lowest rate. This isn’t a year of the Nicer Isa. It’s a Nasty Isa. It’s a farce. And we put up with it because they know we will. Because they know we want something in Cash, something more accessible. They’re right. We grumble but we put up with it because, well, what are the options? Property? Money Market funds? 
Most of us plebs haven’t got that kind of cash to stash. I can’t even afford a Lamb, let alone a Lambo.
I accept we have to accept these low rates. Nobody is going to listen to we great unwashed in this shady economic environment. But please, stop pretending these are Nisas. They’re not. They’re Pathetic Isas. Pisas. And I’ll leave the pronunciation up to you.