Are You Investing Enough In Your ISAs?
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Posted On :
Mar-29-2011
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Article Word Count :
1031
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Since their introduction in 1999, replacing PEPs and TESSAs, ISAs have been one of the most popular forms of long-term saving for many investors in the UK. Many people who have set up an ISA account have often done so with a view to making a monthly contribution to it, which when added up means that the amount they are investing in their ISA does not exceed the yearly limit.
Prior to the financial year 2008-09, a person holding a cash ISA was only allowed to invest £3,000 per annum in their ISA and as such, many people set up a monthly payment, which would allow them to invest that £3,000 in 12 equal payments over the course of the year. This was certainly one of the most convenient aspects of having an ISA and is certainly one of the reasons for its popularity with many British savers.
That situation changed during 2008-09. For this year, the limit on investing in a cash ISA was raised to £3,600, while the limit on a stocks and shares ISA was increased from £7,000 to £7,200. These limits were adhered to for two years but for the current 2010-11 financial year, there was an even greater increase in the amount an investor was allowed to put into an ISA annually. This year, investors can place up to £5,100 in a cash ISA and up to £10,200 in a stocks and shares ISA, or up to £10,200 in a combination of the two.
The upshot of this has been that many account holders have not paid into their ISA the full amount they are allowed to under the new governmental legislation. As such, the clock is ticking for those investors to make up the shortfall ahead of the April deadline that signals the end of the current financial year and marks the start of the new one.
Leaving setting up a new ISA or investing in a current one until the last minute however is not the best idea. Life has a habit of getting in the way of even the most mundane of actions and it is all too easy to become distracted by things at home or at work, fall ill or be sent away somewhere on business which means that you miss this crucial date. It is good practice therefore for people wanting to bring their investment up to the new limit to endeavour to do so well in advance of the deadline.
While many providers will accept online applications up to the very last minute, midnight on Monday 4th April, there are some that will only accept applications, on paper at least, on the last working day before the end of the current financial year. This should allow providers the time to set up the ISA for the current financial year without impinging on the investments you can make in the following yea.
If you are one of these new ISA customers, it is important for you to invest something even more important than money into your chosen ISA, and that is time.
What this means is that as a customer you ensure you make the correct choices for you and your money by researching all the options available. It is well worth taking the time to compare ISAs to see which of the products on offer are best suited to your needs. It is not simply a case of looking for the highest rate of interest on offer; there are a lot of other things to consider when you open that first ISA.
For some people, the best ISAs for them are not cash ISAs but stocks and shares ISAs. This is particularly the case if you have more capital to invest than the £5,100 limit that cash ISAs are subject to.
A stocks and shares ISA allows you to invest up to £10,200 in 2010-2011, although this is a very different form of investment compared to a cash ISA. In a cash ISA, your money is held and an interest rate applied to it for the duration it is in the account. Your money is not at risk and any profit that your cash generates is yours tax-free. In a stocks and shares ISA, your money can be invested in a number of ‘qualifying investments’, which includes, as the name implies, stocks and shares among other things. As a result of this, it is feasible that a stocks and shares ISA may lose at least five per cent of the total investment and this is assessed as a form of ‘risk’. The other side of that, however, is there is also a chance that the stocks and shares ISA may well perform better than expected, or in comparison with a cash ISA, and any money made by the investment company who invested your capital is yours to keep, tax free.
As with many things linked with stocks and shares, this type of ISA is very much a risk and reward; though the risk is limited and assessed in advance to allow the investor to assess whether it is a risk they are prepared to accept.
The truth is, the best ISA for any individual is the one which is going to give them the best possible return and allows them to feel secure and confident over their investment. An investor needs to weigh up whether they are happier with the no-risk cash ISA, with lower but guaranteed growth, or to consider a stocks and shares ISA with a stated risk, but the potential to make more money on their investment. Or, it is entirely possible to have a combination of both types of ISA, provided that the total investment in both does not exceed £10,200 in 2010-2011.
Investing in an ISA, regardless of the type, is not just a case of making payments into the account and forgetting about it. The more time and effort invested at the start of the process in finding the right ISA to suit your situation, the more likelihood you will start to see your money work profitably for you.
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Article Source :
http://www.articleseen.com/Article_Are You Investing Enough In Your ISAs?_57482.aspx
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Author Resource :
Many people who have set up an ISA account have often done so with a view to making a monthly contribution to it. More information on ISAs is available online, and it’s important to research as fully as possible before beginning a commitment.
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Keywords :
ISA accounts, best ISAs, compare ISAs,
Category :
Finance
:
Finance
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