ISA / bonds / fix rate saver etc

[I'm With Stupid]

Unless it's for a short term, I dont understand why someone would opt for a cash isa over a stocks and shares isa where they would nearly certainly get a much better return.

Honestly, thinking back to when I was an 18 year-old, there were two main reasons. Firstly, when you look at the two options, one of them says in big letters that you might lose money. They don't give you a big explanation of historical trends that show that you're likely to make way more money. And secondly, when I was younger, an ISA wasn't really an investment, it was just an account you put your extra money in to make a slightly higher interest rate than keeping it in your current account. Let's be honest, banks make money off people's ignorance, so I imagine they'd rather most people kept their money in a regular ISA, so they're more than happy to keep that warning on the stocks and shares ISA. These are two of the reasons I'm not rich now.

 

[SWP's back]

Care fees can be a 7 year look back and reverse any gifts. But this only applies if the state starts taking on the cost. If your oldies have assets they will most likely have to pay anyway.

Care fees have no limit on look back as I said and obviously it only applies if the state ends up assuming the cost. Not entirely sure why you quoted me.

 

[SWP's back]

As I understand it, the 7-year rule is a myth - authorities can go back as far as they like if they suspect people have moved money around to avoid care fees.

Correct.

 

[Corky]

It is normally explicit in the Charging Policy of the Social Care Authority and they following the Gov guidance on deprivation of assets in Annex E of the following:

https://www.gov.uk/government/publications/care-act-statutory-guidance/care-and-support-statutory-guidance#AnnexE

It is about INTENTION rather than anything else, as the SCA isn't going to say the adult can't spend or give away money as they wish, as it is a major wellbeing issue which they are trying to promote, it is just when there is a suspicion that the money was given away just to avoid residential or domiciliary care costs.

It isn't a one off test either, it will continue if after care is provided, if your child is getting divorced and you help them pay £100k for their legal fees as their liquidity is seriously affected, they are unlikely to say the intention was to avoid care costs.

 

[denislawsbackheel]

As I understand it, the 7-year rule is a myth - authorities can go back as far as they like if they suspect people have moved money around to avoid care fees.

This.
There is no statute of limitations where asset deprivation is concerned.

 

[flook]

Unless it's for a short term, I dont understand why someone would opt for a cash isa over a stocks and shares isa where they would nearly certainly get a much better return.

Because having a cash fund is always a good idea, and the best place for it is usually an ISA. The size of that fund depends on your stage in life, for me as I approach state pension age and start to draw on my S&S ISA it's to provide an alternative source of funds should the stock market choose that particular time to go full Trump.

It's always good to hold 3-6 months of cash anyway

 

[halfmist]

Because having a cash fund is always a good idea, and the best place for it is usually an ISA. The size of that fund depends on your stage in life, for me as I approach state pension age and start to draw on my S&S ISA it's to provide an alternative source of funds should the stock market choose that particular time to go full Trump.

It's always good to hold 3-6 months of cash anyway

Agreed.
I am now happily retired and gambling on the stock market helped me get there.
Now I am risk adverse so only invest in cash based products and land and property.
They are low risk, usually beat inflation and I can sleep soundly at night knowing someone or something in the world has not happened overnight that has halved my investment.

 

[halfmist]

Just beware that the 7 year rule is not necessarily tax free.
There are usually two areas that come in to play.
1) Gifts with reservation whereby someone gives you something but they continue to benefit from it. It normally applies to houses where parents gift the house to their kids but continue to live in it.
Here complex rules come in to play
2) Sale/Gift of assets at below market value.
If an asset that is subject to capital gains (such as property producing rental income), is given away, or sold below market value, market value at the time of sale, has to be used instead of deemed sale proceeds.
So a gift could well end up with a substantial capital gains tax liability on the person giving the gift.
So just be careful if you are thinking gifts given are free of tax, they are usually not.

 

[denislawsbackheel]

Agreed.
I am now happily retired and gambling on the stock market helped me get there.
Now I am risk adverse so only invest in cash based products and land and property.
They are low risk, usually beat inflation and I can sleep soundly at night knowing someone or something in the world has not happened overnight that has halved my investment.

Same here, at 73 I don’t have time for long term investments. I’ll stay in cash tax free ISAs thank you.

 

[Fred_Quimby]

In my younger days our financial advisor said that S&S ISAs were long term investments for 10 years or more and during that time they did very well over the long term. At my age, 76, it does seam a bit pointless putting money away for 10 years or more when I might not live that long.

 

[MorrisonToAguero]

It’s getting at the right time global markets have been choppy and Trumps tariffs have made investors nervous, gold is always a safe haven where you get your money back bare minimum.

Gold is having a good run now but it can certainly lose out in the wrong conditions. Everything that makes it a safe haven in troubled times makes it a disaster in great times.

And it is not a great long-term plan. It pays no dividends of course, and it's not covered by the usual FCA compensation schemes.

If you want ultra-safe but not cash, money-market or government bond funds are the winner. Especially short-dated bonds. Very low risk, but a low return of course. Hold a bond until its maturity date and you definitely get the face value back as a minimum.

 

[halfmist]

Gold is having a good run now but it can certainly lose out in the wrong conditions. Everything that makes it a safe haven in troubled times makes it a disaster in great times.

And it is not a great long-term plan. It pays no dividends of course, and it's not covered by the usual FCA compensation schemes.

If you want ultra-safe but not cash, money-market or government bond funds are the winner. Especially short-dated bonds. Very low risk, but a low return of course. Hold a bond until its maturity date and you definitely get the face value back as a minimum.

The other major problems with gold are, it can be volatile and, unless you are buying in bulk you have to cover the dealers profit margin before you will start to see a return and that can end up a long wait.

 

[Kompany Car]

I think 7 years is the limit if you want to avoid your children getting stung for tax, start giving them their inheritance now. You can gift £3k per annum anyway.

You can gift more than that if you do it for long enough and have it as a regular amount. Its called normal expenditure out of income. We give my son a regular amount on a monthly basis that we increase with inflation each year. We've been doing it for the past 10yrs.

The key is making it regular and consistent, so not as one off chunks (unless they are frequent chunks) and keeping records. But it must be demonstrably excess income, so you can't impoverish yourself.

This is in addition to one off gifts.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14241

 

[Gray]

You can gift more than that if you do it for long enough and have it as a regular amount. Its called normal expenditure out of income. We give my son a regular amount on a monthly basis that we increase with inflation each year. We've been doing it for the past 10yrs.

The key is making it regular and consistent, so not as one off chunks (unless they are frequent chunks) and keeping records. But it must be demonstrably excess income, so you can't impoverish yourself.

This is in addition to one off gifts.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14241

Well done that is a fantastic thing to do.

 

[SWP's back]

Let’s also not forget that assuming it’s two parents with a property, IHT won’t even come into it unless your estate that you’re leaving your kids is over £1m either. It affects a low percentage (a handful) of estates in the UK.

Long term care funding however is far more likely to be problematic.