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Flexible ISAs and the cost of living crisis

ended 03. May 2023

A few quick Qs relating to flexible ISAs and the cost of living crisis, which we'll be sending to the national and trade media later today. In your experience, during the cost of living crisis (so over the past year or so):

  • Have more people used flexible ISAs to free up cash to help with, say, soaring energy bills or to cover far higher mortgage payments when their ultra-low fixed rate ended? In short, to help them out of a corner rather than as a more standard cash flow tool (for example to buy a car before they've sold their existing one)?
  • Have you had clients who have been unable to pay back the full amount withdrawn due to the cost of living crisis and who have lost their ISA allowance (for that tax year) as a result?
  • Has the cost of living crisis made clients more aware of the flexible ISA, as it offers them quick access to cash should they need it?
  • Have more clients started asking you about flexible ISAs as they could be a useful short-term facility in tough times, or are they still relatively off the radar among the public?
  • Are some flexible ISAs more flexible than others, i.e. with no limits on withdrawal? Any recommendations?

Any other trends you're seeing relating to flexible ISAs, send them across.

3 responses from the Newspage community

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Editor
Scott GallacherVerified
Director at Rowley Turton
While our clients, who are generally wealthier, have not shown a significant trend in using flexible ISAs to cope with the cost of living crisis, I recognise that they could be helpful for those with lower incomes to free up cash for unexpected expenses. However, using long-term savings for short-term needs is concerning, as it can impact future financial security. Before withdrawing from an ISA or other long-term savings account, it's essential to consider the implications carefully.
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Editor
Ross LaceyVerified
Director & Independent Financial Adviser at Fairview Financial Management
Flexible ISAs are really no different from "non-flexible" ISAs when it comes to the speed of taking money out - the only difference is that with Flexible ISAs the money can be put back in again before the end of the tax year without using up any further allowance. Most ISAs we recommend are flexible by default but we've rarely seen clients have any need to use this functionality. A recent example though was a client who withdrew funds from their ISA to make an overpayment on their mortgage before remortgaging - this helped us secure them a better rate as they were then in a lower loan-to-value bracket. The client then used their bonus received in March 2023 to pay the money back into their ISA to retain their allowance.
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Joshua GerstlerVerified
Chartered Financial Planner at The Orchard Practice
"Not every ISA provider offers a Flexible ISA. It is a great benefit to be able to withdraw money from the ISA and replace it before the end of the tax year. One client is currently using this facility to purchase his new home as he is not yet sold his current property. He hopes to complete on his sale in the next few months and can therefore replenish the funds in the ISA before the end of the tax year."