Isa?

Warwickshire Telegraph - - FRONT PAGE -

ITH the new tax year hav­ing started on April 6, this time of year is tra­di­tion­ally known as ‘Isa sea­son’, when com­pe­ti­tion be­tween providers is ramped up as savers look to take out new deals.

While the Isa mar­ket has been a bit lack­lus­tre in re­cent years in the low-in­ter­est en­vi­ron­ment, there are still good rea­sons why an Isa could be worth­while, depend­ing on your in­di­vid­ual sav­ings needs.

And in re­cent weeks, there have also been signs of new life breath­ing into the Isa mar­ket. So here’s a guide on how Isa sav­ing could help you... ISAS are a tax ef­fi­cient way of build­ing a sav­ings pot. Money held in Isas is ring-fenced from the tax­man. While there are many dif­fer­ent types of Isa to choose from nowa­days, re­search from Al­der­more Bank found that over three-fifths (62%) of peo­ple use only one Isa prod­uct to save. THE in­tro­duc­tion of the per­sonal sav­ings al­lowance has led many savers to won­der whether it’s worth both­er­ing with a cash Isa, given savers no longer pay tax on the first £1,000 of in­ter­est, or £500 for higher rate tax­pay­ers.

But Sarah Coles, a per­sonal fi­nance an­a­lyst at Har­g­reaves Lans­down, says it’s im­por­tant to think ahead. “The key is what you could save fur­ther down the line. The tax sav­ings on Isas ac­cu­mu­late as your sav­ings build,” says Sarah. “These sav­ings will be mag­ni­fied if in­ter­est rates rise, you move tax brack­ets, or the sav­ings al­lowance is cut.”

Mean­while, there have been signs of life re­turn­ing to the cash Isa mar­ket this spring. Rachel Springall, a fi­nance ex­pert at mon­ey­facts.co. uk, says: “As we have seen over 100 rate rises to Isas since the start of 2018, it’s worth­while for savers to con­sider util­is­ing their Isa al­lowance for the long-term ben­e­fits, and avoid any de­lay in ap­ply­ing for the top rates be­fore the buzz of Isa sea­son fiz­zles out.” WHAT you are sav­ing for will have a bear­ing on which type of Isa you choose. If you’re sav­ing for the longer term, stocks and shares may be an op­tion to con­sider. Or a cash Isa may be more suit­able if you want to ac­cess your money quickly and don’t like the idea of risk.

“You can tailor your Isa to take ex­actly the amount of risk that suits your needs,” says Sarah. “You can opt for a cash ac­count, con­ser­va­tively-in­vested funds, more ad­ven­tur­ous funds, sin­gle com­pany shares, or any com­bi­na­tion of all of them. You can also trans­fer be­tween as­sets if your cir­cum­stances change.”

The Isa al­lowance for 2018/19 will re­main un­changed at £20,000. THERE are cash, as well as stocks and shares ver­sions of Ju­nior Isas. SOME Isas have gov­ern­ment bonuses to help you onto the prop­erty lad­der. Adults aged un­der 40 can open a Life­time Isa, which helps peo­ple save for their first home, or their re­tire­ment, in the same pot.

Help to Buy Isas are also avail­able to those sav­ing for their first home. Both have pros and cons, depend­ing on your in­di­vid­ual needs, so it’s worth weigh­ing these up. MANY peo­ple are now in­ter­ested in ‘eth­i­cal’ sav­ings ac­counts, which could have a pos­i­tive im­pact. Two-fifths (42%) of savers would be mo­ti­vated to save in an Isa if they knew their money would be used to fi­nance im­prove­ments to so­ci­ety, a sur­vey by Tri­o­dos Bank has found.

There are also ‘in­no­va­tive fi­nance Isas’, where money in­vested through peer-to-peer lenders can be held in an Isa. The po­ten­tial re­turns avail­able may be higher with an in­no­va­tive fi­nance Isa than just keep­ing the money in a cash Isa, but there are also risks which should be care­fully con­sid­ered.

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