"Norman Wells" wrote in message
...
Andy Pandy wrote:
"Norman Wells" wrote in
message ...

I wonder about that. If you take cash ISAs as an example of tax free
savings, all that's happened is that the banks and building societies
offer those at rates lower than any corresponding non-ISA account.

Do they? I've got a regular saver ISA paying 7% with FD, they weren't
offering a regular saver non-ISA paying 11.74% or even 8.75%.

If you take Halifax just as an example, their current cash ISA fixed rates
for 2, 3 and 4 years are 3.5, 3.75 and 4.25%. The corresponding rates for
2, 3 and 4 year fixed rate term bonds not in an ISA are 4.0, 4.25 and
4.5%. OK, you'll get back slightly more from the ISAs than you would from
the term bonds after basic rate tax, but why are the gross rates
consistently lower on the ISAs? It can only be that the bank is taking or
'sharing' what the government intended should really be yours. That's
unfair, disreputable and underhand in my view.

"Only"? There might be extra admin involved for ISAs. Or more likely there
is a behavioural difference in investors - eg for bonds they might account
for the likelyhood of early closure, or average investment, which may be
different for ISAs.

For instant access accounts, ISAs pay pretty much the same if not more
interest than the equivalent non ISA account, eg First Direct are offering
an ISA at 2.5% for a year, instant access. Their best offering for non-ISA
instant access is 0.25% gross. They've always offered better rates from
ISAs - the difference is nothing to do with tax but an expected behavioural
difference, people don't tend to use ISAs as instant access even if they
can - they tend to invest and leave. And the interest rate drops after a
year (when sensible people transfer out).

--
Andy