The Best Cash ISA for Beating Bankster Fraud and Government Money Printing Inflation
Personal_Finance / ISA's Sep 26, 2012 - 04:42 AM GMTBy: Nadeem_Walayat
Britain's savers have been fighting a losing battle since October 2008 when the crash in UK interest rates began following the Prime Minister of the time Gordon Brown taking control of monetary policy from a fumbling mumbling paralysed Governor of the Bank of England and started the ball rolling by announcing the first of a series of interest rate cuts all the way to 0.5% barely 5 months later by March 2009.
Since which time savers have been paying the price for bankster fraud and Weimar style government debt and electronic money printing inflation that the Bank of England likes to use the smoke and mirrors euphuism of calling it Quantitative Easing with little sign despite the economic facts of raging real inflation of more than 20% and official inflation of 15% of the past 3 years alone, there is little sign that the fraud on savers is about to end anytime soon as the bankrupt bailed out criminal crime syndicate that is our banking sector continues to suckle on the teat of their mother Bankster of England.
The bankster's are continuously having every orifice stuffed with tax payer cash to the tune of about £120 billion a year the impact of which is potentially leveraged up ten fold to go and and inflate asset prices such as government bonds which the Bank of England buys back from them thus giving them an instant profit, therefore Britains banks have no incentive to offer decent rates of interest to savers because they make risk free profits by borrowing from and lending to the Government!
Off course this is part of the governments now five year old strategy, because it actually began at least in April 2008 as I wrote at the time (21 Apr 2008 - Bank of England Throws £50 billion of Tax Payers Money at the Banks), where the price paid for printing money has to be borne by someone and that someone are savers and workers who have seen the inflation fraud whittle away the purchasing power of savings and earnings, where the fraud is further enhanced by taxes, for it is not enough that wealth and purchasing power is being stolen annually at an average official inflation rate of 3.4% but that interest received is further taxed at 20% for most savers and 40%+ for the more successful of Britians' workers, as a further slap in the face for working hard rather then choosing to waste ones life on benefits as the a large part of the last Labour governments vote buying frenzy inducing benefit culture housing estates across Britain tend to do.
The Exponential Inflation Mega-trend
Whilst the mainstream press and academics focus WHOLLY on the annual CPI Inflation graph as illustrated below that give the illusion of monetary stability, the reality is that of an exponential inflation mega-trend as illustrated by the second graph below graph that shows that despite the British economy having been in economic depression for the past 4 years, yet it has still suffered official CPI Inflation of 15%.
The inflation mega-trend is something that the mainstream press never mentions as the journalists who think they are economists rely on vested interest academic economists to pump out propaganda that virtually wholly focuses on what amounts to just the annual momentum in the rate of change of inflation that paints a picture of relative stability when the truth is that of an exponential inflation trend that over time virtually guarantees that value of wealth such as savings will effectively be stolen by governments towards the purpose for the buying of votes to win elections. This demands action be taken to protect oneself from this theft of purchasing power, strategies that I have covered at length over the years and in-depth in the Inflation Mega-trend ebook (FREE DOWNLOAD)
Ensure you are subscribed to my always free newsletter for in-depth analysis and specific forecasts on how protect and profit from the ongoing consequences of the debt and money printing induced Inflation Mega-trend. Because as I stated right at the very start, once money printing starts it does not end whilst deficits exist and there is no sign whatsoever that Britain's budget deficit is about to disappear at any point during THIS decade!
Best Cash ISA
Therefore the only hope that savers have had over the past 4 years (other than to take risks by investing in the stocks stealth bull market) has been to park their cash in tax free Cash ISA's (pensions are a fraud for most ordinary workers) where the annual allowance stands at a healthy £5,640 (couples £11,620) more than enough to soak up spare capital for the increasing number of ordinary people who fall into the 40% tax bracket.
In this respect savers have fought hard over the past few years to achieve rates of 3% per annum on instant access accounts and 3.25% on 1 year fixed rates, both still below the average rate of Inflation of 3.4% (CPI which under states real inflation by at least 1%). However, from time to time, the eye of the debt crisis storm settles on the UK savings market for a few short months each year that allows savers to lock in rates of as high as 4.25% fixes for 3 years, which was the rate offered by the HBOS tax payer bailed out Bank (LLoyds TSB Group) in April 2012 though which disappeared within a matter of weeks as rate starved savers lapped it up, to be dropped to 4%, making it uncompetitive against the likes of Santandar's 4% fix for 2 years, which itself disappeared a few months later by the end of July 2012, with the current rate standing at 3.3% which is LESS than the average rate of inflation.
Therefore the strategy for Cash ISA savers to protect against the Inflation stealth theft of wealth (official CPI) must be to attempt to lock in fixed rates at above the average inflation rate when the next opportunity presents itself, so cash ISA savers MUST be prepared to act as soon as these rates materialise which do happen for a short windows each year, rates of 4% for 2 years and 4.25% for 3 years are achievable which starts to approach the real rate inflation stealth theft, and as is usually the case I will endeavour to make my readers aware of such windows of opportunity just as I warned in October 2008 to lock in rates of as high as 7.3% for multiple years ahead of the crash in UK Interest rates.
08 Oct 2008 - UK Interest Rate Forecast 2009
Savers - To reiterate what I have been saying over the last 6 months, savers still have a a golden opportunity to lock in high fixed savings rates which in the UK are above 7% . These rates won't stay around for much longer, were talking perhaps in the days rather than weeks or months. So the time for action is now ! - Yes, banks can go bankrupt but savings are protected which includes accumulated interest. In the UK the protection is for the first £50k per banking group.
Unfortunately the best of the dogs dinner being offered to Cash ISA savers today is in my opinion the Metro Bank 1 year fix at 3.25%. Those wanting to take a longer term risk on Inflation have further options of Halifax's 3 year fix that pays 3.75%, though you could have picked up the same account at 4.25% just 5 months ago which illustrates how poor today's rates are.
My analysis of rate changes over many years is that the best Cash ISA rates tend to materialise during March and April of each year i.e. to coincide with end of tax years and start of the following next years, therefore it maybe better to either wait or opt for an instant access ISA now ahead of transferring funds in March or April 2013.
Best Instant Access ISA
| Financial Institution | Interest Rate | Minimum £ | Comments |
| Sainsbury | 3.01% | £500 | Allow transfers in, but is completely variable i.e. could be dropped within a month! |
Best Notice ISA
| Financial Institution | Interest Rate | Minimum £ | Comments |
| Coventry BS | 3.25% | £1 | 60day notice account. Rate guaranteed until April 2013, includes a 0.5% bonus for 12 months. No transfers in. |
Best Current Fixed Rate ISA's (1 Year)
| Financial Institution | Interest Rate | Fixed Period | Minimum £ | Comments |
| Metro Bank | 3.25% | 1 Year | £1 | Allows transfers in. Early withdrawals allowed subject to 180days loss of interest. |
Best Current Fixed Rate ISA's (2 Year)
| Financial Institution | Interest Rate | Fixed Period | Minimum £ | Comments |
| Halifax | 3.25% | 2 Years | £500 | Allows transfers in. Early withdrawals allowed subject to 180days loss of interest. |
Best Current Fixed Rate ISA's (3 Year)
| Financial Institution | Interest Rate | Fixed Period | Minimum £ | Comments |
| Halifax | 3.75% | 2 Years | £500 | Allows transfers in. Early withdrawals allowed subject to 270days loss of interest. |
Emerging Embryonic UK Housing Bull Market
My analysis of the past year has increasingly been signaling the unfolding of an embryonic UK housing bull market that will increasingly suck in excess capital from interest rate starved savers. This bull market follows on from the crash of 2007 to 2009 (22 Aug 2007 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth ) and the subsequent depression into early 2012 as correctly forecast several years ago.
Last forecast (03 Sep 2010 - UK House Prices and GDP Growth Trends Analysis) concluded in a continuing depression in the UK housing market for the next 3-4 years, with the most probable outcome being for a gradual shallow drift lower in prices over the next 1-2 years (6-12%), followed by a further 1-2 years of base building.
Detailed and lengthy analysis will be required to enable me to generate high probability trend trajectories for the housing market over the next few years. Ensure you are subscribed to my always free newsletter to get my detailed analysis and precise trend forecasts in your email in box.
Summary of ISA Rules & Benefits
- The ISA accounts are TAX FREE, and do not have to be entered onto any tax returns. The equivalent taxable return on a 3% cash ISA for standard rate tax payers is 3.6%. For higher rate tax payers it is 4.2%.
- The income from tax ISA's does not count against many mean tested benefits such as Tax Credits.
- The Allowance for 2012-13 is £11,280, £5,640 for cash and £5,640 for shares ISA's or the whole £11,280 into a shares ISA.
- You can only open ONE New cash ISA per tax year, and you can add new monies to One Cash ISA per tax year (see transfers). Similarly you can open only one new Shares ISA per tax year.
- You do not have to open a Cash ISA with your existing provider, i.e. you can open an account at different providers every year.
- Most providers allow for transfers in. And ALL should allow you to transfer out.
- Once you withdraw from a Cash ISA you cannot then then re-deposit into. The £5,640 limit refers to total deposited, and not maximum account balance. So if you deposit £5,640, and withdraw £1000, then you cannot re-deposit that £1000 in the same tax year as you have used up your £5,640 deposit limit.
- To maximize your tax free interest, it is best to open your account at the start of the tax year.
- The Financial Services Compensation Scheme (FSCS) guarantees the first £85,000 (Euro 100,000) per person, per institution. Those with sizable savings that total more than £85,000 should ensure that their institutions really are separate, especially given the banking crisis forced mergers.
- There is the facility to transfer Cash ISA monies into Shares ISA's but NOT from Shares ISA's to Cash ISA's .
- Next years Cash ISA allowance (2013-14) will increase inline with CPI inflation and will be around £5,880 when announced.
Source and Comments: http://www.marketoracle.co.uk/Article36725.html
By Nadeem Walayat
Copyright © 2005-2012 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.
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