15 October 2013

Why you should avoid Cash ISAs

Let's be clear who this blog applies to first... If you have any investments or intend to have in the near future then this is for you.

Question: Why are ISAs a Good Thing in general?
Answer: Because you don't pay Income Tax or Capital Gains Tax on any income or growth. (You may still have to pay Inheritance Tax but let's ignore that for now.)

So if you have a Cash ISA, you don't pay tax on the interest you receive. But since interest rates are pretty poor at present you don't get much tax to pay, and so there isn't much advantage in a Cash ISA.

In fact, there is a disadvantage if you are an investor. There is an annual limit on how much you can put into ISAs* and if you use your Cash ISA allowance that comes out of your Stocks and Shares ISA allowance. And that can be rather significant - if you expect your Stocks and Shares ISA to grow then there is potentially much more value in those than in a Cash ISA.

So the end result is you save yourself a small amount of tax in a Cash ISA but lose a large amount of potential growth in a Stocks and Shares ISA. The one saving factor is that you can transfer a Cash ISA into a Stocks and Shares ISA later, but in general - avoid Cash ISAs.

* currently (2013/14) £11,520 for a Stocks & Shares ISA, and £5,760 for a Cash ISA

7 October 2013

Should I ... Have Private Medical Insurance?

PMI (or commonly just "health insurance") covers private treatment when you need it - typically for "acute" conditions (things that can largely be cured). It is often provided by employers as part of a remuneration package because it helps you get back to work quicker after an illness. But it can be useful for many people.

Advantages include:
  • Better control on the timing of treatment (jump the NHS queues, or fit treatment in among other commitments)
  • Better control on selection of hospital or specialist
  • A wider range of drugs available
  • Higher quality care (own room, etc.)
A policy could cost somewhere between £30 and £200 a month depending on what is included. Full medical underwriting is likely to be needed, although some policies don't do that and simply exclude claims for any condition you have had before (perhaps within 5 years).

The costs can be kept down by excluding out-patient cover, for example, while some policies give discounts for lifestyle factors such as gym attendance.

So should you have it? For many people it will be an important part of a busy lifestyle, while for others, being more in control of your treatment is the key requirement. 

We all hope we don't need to claim on such insurance, but then that's the whole point of insurance isn't it? It's a safety net for us and our family which helps if things go wrong.

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