SimplyFinance - ISAs

Risks Inherent in ISAs

2007-08-03T07:00:00Z

ISA's are a strong investment tool for many individuals. However, any investments does carry some risk, and you should carefully consider many factors before committing to anything:

ISAs are designed as medium to long term investments. You should not invest in an ISA if you feel there is a good chance that you will need the money in the next 3 to 5 years.
The value of your investment and the level of any income received from it can increase or decrease. There is no guarantee that your investment will grow. Your chances for growth increase over time so it is best to use this tool for medium to long term investments.
The tax efficiency of ISAs is based on current tax law. There is no guarantee that tax rules will remain the same.
If you choose an international trust, changes in exchange rates may cause the value of your investment to increase or decrease.

SimplyFinance can recommend and refer you to several ISA providers, but you should make sure you research any options proposed to ensure you are getting the best deal for your needs and your risk tolerance levels.

All About ISAs

2007-08-03T07:00:00Z

An ISA is a tax-favoured savings account introduced on 6th April 1999. The Treasury has confirmed that ISAs will remain in tact until at least 2010 and should therefore be considered a valuable investment option. ISAs replaced PEPs and TESSAs. ISAs are not considered an an investment. They are a tax-free tool that allows you to shelter investments.

Terms of an ISA:

If you live in the UK and are over the age of 18, you can invest a maximum of £7,000 per year in each tax year. 16 and 17 year olds can also participate and can invest up to £3,000 in a mini cash ISA.
You can either invest in equity or cash. There are strict limits on how much you can put in each ISA. The limits depend, in part, on which ISA you use and vary depending on if you use a maxi ISA or a number of mini ISAs.
In the past, ISAs benefited from a 10% tax credit on UK equities; however, this stopped on 5th April 2004. The allowable stock and share investments in an ISA include open ended investment companies (OEICs), investment trusts, unit trusts, fixed interest corporate bonds, ordinary shares, and preference shares.
A PEP that was formed prior to 6th April 1999 may continue to be held outside an ISA, with the same tax advantages. If you had a TESSA prior to 6th April 1999, you are allowed to run the TESSA for its full five year term.
Income from ISA investments is tax free. You do not have to report it on your tax return. Capital gains are also exempt from CGT.
ISA plans are sold by IFAs, stockbrokers, banks, fund managers and other financial institutions that have the proper authorization. You can buy a pre-defined plan or you can have a 'self-select' ISA and make your own decisions on what to put in it.

SimplyFinance works with several institutions that can provide you an ISA. Fill out one of our brief contact forms to receive more information and to find the ISA program that is best for you.

A Brief History of ISAs

2007-08-02T23:00:00Z

The Treasury has insured that ISAs will remain in tact beyond the originally proposed end date of 2010. In fact, Ed Ballshas, the Economic Secretary, has stated that ISAs are a "vital part" of the Government's plan to provide incentives for long term savings. Given the importance of this investment tool it is a good idea to understand the history of ISAs.

Early attempts to introduce the ISA were not successful. The ISA was intended to replace Personal Equity Plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs). The former were for equity investments and the latter for cash investments. The ISA was not initially well received since the ISAs limit of £7000 with £3000 in cash was considerably less than the former instruments' limits. The two former tools allowed tax exempt savings of up to £10800 per year (£9000 per year into PEPs and £9000 spread over 5 years into a TESSA). Needless to say, many individual investors and the investment community did not see this as an increased incentive for long term savings.

In addition to this, there were several rules and restrictions associated with ISAs that many deemed confusing at best. In addition there were restrictions on tax-credits associated with the Advanced Corporation Tax rules. Most predicted that all of these negative components would prohibit the success of ISAs.

However, the stock market technology boom of 1999 and 2000 added fuel to the ISA fire. With the enormous growth in this sector, investors were less concerned about the details of ISAs and more concerned about getting in quickly. In the 12 months after the launch of ISAs, most accounts suggest sales exceeded £9 billion.

Even after the crash of the technology market, and the subsequent rebuilding of the investment sector, the ISA has continued to thrive. At the end of 2006 ISAs had an investment balance of £220 billion and roughly 17% of the adult population held at least one ISA account.

The Government continues to support ISAs, and rumors of reducing limits have not come to fruition. In fact, the complex rules are being simplified in April 2008, and the Government has stated that the product will be extended beyond 2010. All accounts seem to suggest that the ISA will be a powerful investment tool for many years to come.

If you're interested in investing in an ISA, provide us with a bit of information, and an investment advisor will contact you to discuss the possibility of investment. If you decide to invest, our specialists will assist you in finding the best ISA for your needs. It's fast, easy, and you're under no obligation to SimplyFinance. Let us help you start investing today!

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