ISAs – people often hate them

My cash ISA hasn’t grown. I’m shocked

Increasingly I am meeting prospective new clients who tell me they hate ISAs, when I recommend they invest in one.

How come we can understand that we will never get wealthy holding cash in a bank, yet we complain when an ISA held in a bank fails to perform? Cash is cash wherever it is held. With Bank of England interest rates still at only 0.5%, how could cash ever grow?

“If you don’t use this years cash ISA allowance you must be an idiot”

I wish I had a pound for every time someone tells me that ISAs are useless. Simply not true. ISAs that can only hold cash will give a useless return. A cash ISA is a holder of cash. The bank that flogged that ISA to you, will do very well from your cash thank you. Because they will use your cash and lend it on to poor folk who agree to pay 19.5% in interest on authorised overdrafts of only a few thousand pounds. Excessive return for the bank, disappointment for the ISA investor and enduring heartache for the borrower. Please tell me you no longer trust the banks.

Shocking! First view of naked ISA

So let’s get this straight. An Individual Savings Account is not a physical thing that you are free to love or hate. It doesn’t exist in the physical world. It exists merely as a set of tax rules. Let me show you an ISA completely naked. Everything the banks and investment companies do to convince us their ISA is the best is just fancy packaging. Beneath those clothes lies the same naked ISA. Now can you understand when you are forced to switch cash ISAs from one product to another just what a false concept it is? The underlying ISA is the same. The banks are just messing with you. Repeat. I no longer trust the banks. (Or any entity in possession of a banking licence)

I love ISAs

I love ISAs as a tax free holder of our life-savings. ISAs have allowed my clients to double their life-savings in only 7 years. The UK Goverment has not taken their 20%-40% tax bite. Obviously I’m talking about ISAs where we are free to make our own investment decisions. They are called Stocks and Shares ISAs, but that’s a misnomer. They should be called “hold any investment that has a chance of growing ISAs”.

Where can I invest a Stocks & Shares ISA?

Its a long list. It includes Corporate Bonds, UK Government Gilts, Overseas Gilts, UK Commercial Property, Overseas Commercial Property, UK Shares, UK Funds, Large Dividend Paying Shares, Small Growth Shares, Tiny AIM Shares, Investment Trusts, Foreign Shares, Foreign Funds, Hedge Funds, Commodities like Gold and Oil. Oh and Cash!

But let’s not forget the amazing investment opportunities that lie within; Off Plan Dodgy African Island Property schemes offering 18% guaranteed returns, Own your own Brazilian Teak Forest, Hopelessly Proliferate Student Property investments lacking only students prepared to pay £9,000 per annum tuition fees, a Revolutionary process that makes Oil out of simply water, air and cash (I made that one up – but I’m sure it’s coming)

Something for Everyone

The taxation rules that govern ISAs are a wonderful construct. A beautiful thing that has been hacked and hijacked by banks for their own selfish gain. ISAs were created to give the little man an opportunity to build up life-savings outside of UK taxation. My clients understand that it’s not about the ISA, it’s what’s held within the ISA that matters.

Many people misunderstand ISAs. Well done you banks. Again repeat after me. I no longer trust the banks. We don’t hate ISAs, we hate what banks have done to them.

6 Replies to “ISAs – people often hate them”

  1. Nice one Howard, I have often looked at bank ISA’s and wondered. We’ve 2 bank holidays coming up. 2 golden opportunities to have a ponder on non-bank ISA’s while the bank manager is away with his trousers rolled up and a knotted hanky on his head.

  2. Hi Howard I am surprised that any of your clients like or trust the banks – they are a necessary evil. They don’t lend to you when you want the money and can show them a great opportunity for them and you, but later when things have changed offer to lend when you don’t need it or the conditions are not right. They never seem to learn – perhaps they should employ ex-directors of financially sound companies to run the branches. By the way I have always thought that the old PEPs and new ISAs were and are great tax efficient wrappers for our money. There I have had my rant too.

  3. Totally agree, Howard! Haven’t trusted the banks for years! Why do instantaneous electronic funds transfers take so long to get into your account as well?!! There’s no little gnome pushing a wheelbarrow of cash round Threadneedle Street!! Your money’s just sloshing round the banking system for a couple of days, to the bank’s benefit, not yours!

  4. What a great insight in to the way banks work. Howard there’s a phone call coming your way.

  5. Howard, you are spot on.

    The banks have robbed us for years.

    My motto for Howard.

    ISAS

    I Saw A Solution.

    Regards

    Denis

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