The Fixer: Are Isas worth the hassle?
It can seem impossible to get a fair result when you are battling a financial issue alone. But never fear! The AOL Money Fixer is here to help.
I keep being told that I should invest in a cash Isa before the end of the tax year, but with the account on offer at my bank offering interest at about 2%, I can't really see why I should.
I am already earning 2% on my savings account. And while I know that there tax advantages attached to Isas, I can't believe that they make that much difference to the returns.
Is it really worth the bother of switching my savings to a cash Isa?
P Tubbs, Newcastle
Dear Mr Tubbs,
It is true that the rates available on cash Isas at the moment are not exactly great. However, the tax breaks available really do make it vital to use your annual allowance if you can.
A saver putting the maximum amount into cash Isas since the tax-free accounts were launched in April 1999 would now have an impressive £60,000 – even if he or she only earned the Bank of England base rate in each of those years.
And as long as you pay tax, a cash Isa always makes sense. If, for example, you pay tax at the higher rate, your ordinary savings interest will be taxed at 40%, meaning you would need a standard account paying 5% to beat a cash ISA at 3%.
And even if you pay 20% on your savings interest, you would still need a standard account with a rate of 3.75% to beat the same ISA - and that simply is not available in this low interest rate environment.
You can, however, earn 3% on your cash Isa savings by shopping around for the best accounts, currently from Santander and Halifax.
If you have the funds available, I would therefore advise opening a cash Isa and paying in the full £5,640 allowance for this tax year before April 5.
Whatever your financial problem, write to firstname.lastname@example.org and The AOL Money Fixer will get on the case.