[Feature Request šŸ”§] Flexible ISAs šŸ¤ø

Ideas šŸ’”
23

Is it correct to say that there is absolutely no downside to the user for a flexible ISA.?

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24

An interesting use case is that you can use this to effectively roll over your ISA allowance for another year. If you have enough spare cash, from an emergency fund perhaps, you can top up to the limit at the end of the tax year and then immediately withdraw it back at the start of the new year. You then have the facility to invest that allowance later in the new year (useful if you think you might be able to increase your savings rate or are expecting a bonus / windfall).

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25

Need a flexible ISA in my life :heart_eyes:

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26

Honestly didnā€™t know this was an option but it would be really handy and as far as I know something of a USP for Freetrade

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27

@Freetrade_Team any updates to this?

Use case is simple. Iā€™m hoping to invest up my Ā£20k contribution limit but if life circumstances change and I need to withdraw some cash, Iā€™d like to be able to contribute that again if I can rather than have to wait to the following year.

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28

I presume it is not easy to implement this, but a flexible ISA is what I would value the most at present.

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29

Agree. I donā€™t understand why this isnā€™t the default.

30

A cynical view may be that FT donā€™t offer this so that their users stay invested. Most major brokers donā€™t offer a flexible S&S ISA. Iā€™d also like a flexible ISA but I can see why itā€™s not a priority

For your scenario where your personal circumstances may change I would consider building an emergency fund in cash. Personal Finance blogs and advisors often talk about 6 months of expenses covered. It could take at least 5 working days to sell and withdraw from your S&S ISA which isnā€™t ideal in an emergency.

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31

Yes I would like to be able to withdraw and replace cash, within the same isa year!

32

Am replying to a comment from another thread. But continued discussion seems more suitable for this thread.

Could you highlight some Flexible S&S ISAs that are on the market?

Iā€™m under the impression ISA flexibility is relatively common with Innovative Finance ISAs but not common with S&S ISAs. Cash ISAs somewhere in between.

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33

Vanguard and Charles Stanley offer them, but there are other limitations and fees. As much as it would be nice to have the option, FT might not prioritise it as the vast majority of users arenā€™t going to use the functionality regularly.

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34

If it were possible to vote against a feature, I would vote against this one. It would increase accounting complexity, and therefore cost, and I donā€™t see much of a benefit in it, at least for my own personal circumstances.

I wonder how many people who withdraw from a flexible ISA actually do replace the money within the year? Is it just a way of making a withdrawal psychologically easier? I suspect it is just a way of reducing the barriers to withdrawal, in which case Iā€™d rather keep the barriers to help stop me from dipping into my ISAs.

I do make an ISA transfer about once a year now, to move money from one of my ISAs to another as needed, and am very happy that ISA providers generally donā€™t charge for that.

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35

Iā€™m sure people could be found to say the same for pretty much every idea on the community.

I donā€™t really see why it would in a significant way. Flexible ISAs are very common on P2P lending platforms and have been ever since they introduced ISAs. I donā€™t know why it would be more complex for a recently built S&S platform. All it amounts to is upward adjustment of the remaining deposit entitlement in current tax year after a withdrawal is made.

Iā€™ve used it most years since they were introduced and have always paid the money back. Itā€™s generally been to keep some of my money as cash in interest paying accounts whilst still being able to quickly move back into ISA if/when desired. Transfers from cash ISAs to investment ISAs are slow so no longer using cash ISAs for this purpose.

Incidentally, if Freetrade did have Flexible ISA terms Iā€™d be inclined to upgrade to Plus to earn interest on cash within Freetrade. But it only makes sense to me if I could temporarily withdraw that cash if emergency need arose and pay back later in the year.

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36

I can see your point in the first paragraph, although I do not agree.

What I cannot possibly understand is how someone would choose to ā€˜keep the barriersā€™ when it comes to investing trough a platform.

37

I can try to explain my thinking. I see the non-flexibility of a standard ISA as useful because it incentivises me to keep my money within the tax wrapper, which is the behaviour that I want to encourage in myself.

If my ISA is a standard ISA, then withdrawing money from it will make me lose a tax benefit. That knowledge is a psychological barrier that helps me slow down and think very carefully before withdrawing. If my ISA were flexible, the barrier to withdrawing would be reduced, and I would be more likely to withdraw money from it because I would be able to convince myself that I could replace the money before the end of the year. But that wasnā€™t my original investment plan, and my ability to replace the money is not guaranteed as something could go wrong along the way. So I donā€™t feel that making it easier for me to withdraw money from my ISA helps me with my overall investing plan; instead, I would rather it be difficult (psychologically) for me to withdraw the money, to help me stick to my original objective.

I do acknowledge that there might be circumstances when it would be better to withdraw money than to keep it in the ISA, but a standard ISA is not an absolute barrier to withdrawing money, itā€™s just a disincentive that makes me think harder to be really sure that withdrawing money is the best thing to do. You might or might not feel that a commitment mechanism like that is useful to you. And I am not saying that flexible ISAs are a terrible thing, I am only saying that if this were a democracy (and I know it is not!) I would vote against them because for me the cost (even if it is small) would outweigh the benefit. Your mileage, as they say, may vary.

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38

I think it would be useful to have a flexible ISA, in particular as per the 3% current interest on cash in the ISA up to Ā£4k for plus accounts, that means itā€™s also in effect a ā€˜saving accountā€™, where you can keep some money, that could be saved up towards holidays etc, that you could take out, and than replace within the same tax year, which would be beneficial for sure.
just as an example.

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39

Afternoon all,

Wanted to follow up with @Freetrade_Team, is there any news regarding making ISAā€™s flexible?

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40

It would really make a difference to raise cash for short term liquidity purposes. @Freetrade_Team, is there any update?

41

With the upcoming expansion Iā€™d hope FT are generalising tax advantaged accounts (rather than every new account type representing a discrete implementation with additional development effort) which should make flexible ISAs and JISA, LISA, JSIPP fairly simple to add.

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42

Doubt they could flexibly implement LISA due to the specific rules on that one.