Archive for the ‘ISA Season’ Category

Top 10 Tips for 2017 ISA season

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With just over 7 weeks until the end of the tax year, now is the time to consider making good use of your ISA allowance if you have not done so already. Considering ways to shelter your hard earned cash from the tax man should be a top priority, and so this ISA season period between now and the end of the tax year is an important time for savers and investors.

To help you act and act fast, our head of savings and investments, Oliver Roylance-Smith, has put together his Top 10 tips for the 2017 ISA season, so there can be no excuse for missing out…

Tip 1 – Don’t miss any deadlines

Before you do anything else ISA-related, make sure you remember the most important end of tax year deadline which is midnight on 5th April. This is the main deadline to remember since it marks the latest date for using your ISA allowance within the current 2016/17 tax year. Remember that you cannot backdate your ISA allowance once this deadline has passed – if you don’t use it, you lose it.

Also look out for other deadlines which may apply. Many ISA providers will need your application before this date, whilst some ISA plans have an earlier deadline for ISA transfers. Some may also offer limited funding and may close early if they become oversubscribed.

Tip 2 – Know your limits…

At the start of each financial year, HMRC set a limit on the amount each individual can put into an ISA over the course of the next twelve months, between 6th April and the following 5th April. This is known as the ISA allowance. The ISA allowance for the current tax year (2016/17) stands at £15,240.

Tip 3 – Maximise your ISA allowance

You can put your entire ISA allowance into a Cash ISA, a Stocks & Shares ISA (Investment ISA) or the new Innovative Finance ISA, or any combination thereof, i.e. if you decide to use some of the allowance in one type of ISA, you can also put any remaining balance into either or both of the other types, provided the combined total is no more than the £15,240 ISA allowance. Also remember that this allowance is per person (over the age of 16 for a Cash ISA, and age 18 for an Investment ISA and Innovative Finance ISA), so a couple can invest up to £30,480 in total this tax year.

Tip 4 – Use next year’s £20,000

The ISA allowance will increase to £20,000 from 6th April 2017, so if you want to go one step better than making sure you beat this tax year’s deadline, why not sort out the following year’s ISA allowance as well? Investec Bank for example have Double ISA functionality on all of their current plans, which means you can apply for both 2016/17 and 2017/18 tax years through one application. So why not start as you mean to go on and get organised right at the start of the new tax year? – with a combined ISA allowance of up to £35,240 over the two tax years (that’s £70,480 per couple), this means one less thing to worry about as well as getting the beneficial tax treatment for the full tax year.

Tip 5 – Consider the impact of current ISA savings rates

Despite the generous increases to the overall ISA allowance in recent years, it is not all good news, especially for cash savers. This is because the increases have coincided with some of the lowest Cash ISA savings rates on record, with none paying more than the current rate of inflation (1.6%, as measured by the Consumer Price Index). Therefore many Cash ISA savers are either losing money in real terms, or having to consider taking on more risk with their capital. As a consequence, more and more ISA savers are looking towards the Stocks & Shares ISA, which has seen record subscription numbers in the last couple of years. Please note that Stocks & Shares ISAs put your capital at risk and should generally be considered as a longer term option.

Tip 6 – Remember the Personal Savings Allowance

Remember that since the start of the current tax year (6th April 2016), most people receive a personal tax free allowance for interest earnings on savings. For basic rate taxpayers, this is set at £1,000 each tax year, whilst higher rate taxpayers get an allowance of £500. Since non-Cash ISA savings rates are normally much higher than Cash ISA rates, and the interest earned by many savers now falls within the Personal Savings Allowance, this has also contributed to higher numbers using their ISA allowance for investments in the hunt for higher returns.

Tip 7 – Think about tax free income

Although the personal savings allowance has resulted in many savers not having to worry as much about the impact of tax on their overall returns, there are still other considerations and those who have existing ISAs, are higher (or additional) rate tax payers, or who might receive high levels of income from their capital in the future, should all think about using ISAs to receive tax free income. Not only does this income not need to be declared on a tax return, but income from ISAs is not included in the personal savings allowance.

Tip 8 – Review existing ISAs

It’s not in your ISA provider’s best interest to offer you the best deal year after year, and don’t rely on them making sure you are aware that your rate has gone down or that a better account or alternative investment is available because it probably won’t happen, even if it is available from the same provider. Interest rates have been in steady decline, especially for existing customers, and once you’ve deposited your hard earned cash, your ISA provider knows from experience that you’re unlikely to get round to switching providers even if your rate ceases to be competitive. Don’t be that person! It’s down to you to review your existing ISAs.

Tip 9 – Take advantage of ISA transfers

Many of us already have existing ISAs, however, like so many other savers and investors, you may find that your ISA is no longer paying a competitive rate or your investments are underperforming – this is where the ISA transfer can help. You can transfer all previous ISA holdings and most allow you to do this without charge, although don’t forget to check whether there are penalties from your existing provider. Remember that now you can transfer between Cash ISAs and Stocks & Shares ISAs without any restriction, which means that you can choose to keep all of your ISA savings and/or your investments in one place.

Tip 10 – Understand what your ISA could achieve

When considering why to try and maximise your ISA allowance, apart from sheltering your income or growth from the tax man, it is important to understand how much you could achieve over time. For example, if you had invested the maximum into an Investment ISA since the 1999/2000 tax year, and it had grown at 5% each year, you would now have a lump sum of over £250,000. This is a significant amount, with no additional liability to income or capital gains tax. Please note that the tax efficiency of ISAs is based on current tax law which is subject to change in the future.

Start a new ISA or transfer your current ISA now

The range of ISA options to choose from is significant and changing day by day in the run up to 5th April. As the end of the tax year approaches, Cash ISA providers in particular will try and persuade you that their offering is the best destination for your hard-earned money, despite this being a period of record low savings. Our range of Cash ISAs, Investment ISAs and Innovative Finance ISAs is constantly being updated and many of the savings accounts and investments are available as new ISAs and accept ISA transfers. Some also have Double ISA functionality, so you can use next year’s ISA allowance early. So start as you mean to go on, review your options carefully and make sure you make the most out of the tax-efficient returns on offer by taking action now…

 

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Please note that this information is based on current law and practice which is subject to change.

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment of ISAs depends on your individual circumstances and legislation which are subject to change in the future. ISA transfer charges may apply, please check with your provider.

The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors.

Investment Focus: Investec FTSE 100 Enhanced Income Plan

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Our Investment Focus articles are designed to give new and existing customers a more detailed overview of a selection of income and growth investment plans, covering both the risks and the rewards. So whilst the income yields from the FTSE 100 remain under pressure, what better way to start 2017 than to review our best selling income plan, offering a high level of fixed monthly income. Some of you may be familiar with the plan, some of you may even have invested or reinvested into the plan, which remains popular year after year with a wide range of income seekers.

In a nutshell

Investec’s FTSE 100 Enhanced Income Plan is a relatively straightforward plan to understand. It pays a fixed rate of income, every month, for a fixed term. Therefore, your income is paid regardless of what happens to the stock market. The ‘FTSE 100’ in the plan title refers to what happens to your original investment, with your initial capital returned at the end of the term unless the FTSE 100 Index falls by more than 50% during the plan term. If it does, and also finishes below its starting value, you will lose 1% for each 1% fall in the Index. This plan therefore puts your capital at risk.

What is driving customers?

This is our best-selling income investment plan. Whether you are working and need to supplement your earnings, or retired and looking at ways to supplement your pension or savings income, the need for income is one of the most common demands put on our capital. Traditional investment funds only tend to offer a variable income, whilst also putting your capital at risk on a daily basis. Rather uniquely in the income investment space, this plan combines a fixed income with some degree of capital protection.

Where have all the fixed rates gone?

In contrast to the high levels of the FTSE 100 Index we have experienced recently, fixed savings rates are still at record lows. With no realistic prospect of any sudden sharp increases, let alone a return to the 4%+ rates that were around five years ago, whatever your situation the ability to meet income needs remains a very real challenge. But against this backdrop of intense pressure on savers, and whilst stock market conditions perhaps raise more questions than they do answers, this investment from Investec has remained a top seller with income seekers. So let’s take a look at its main features…

Fixed income

With savings rates at such low levels, the prospect of a high fixed income is likely to be attractive to a wide range of income seekers. Unusual for an investment, which normally pay a variable income dependent on the performance of the underlying asset, this plan pays a fixed income regardless of the performance of the stock market. The current issue of the plan is paying 5.04% p.a. fixed, which means that the investor has the certainty of knowing at the outset exactly how much they will receive each and every year.

Monthly payments

Another popular feature is the monthly payment frequency since this is the most useful in terms of budgeting, especially when many UK equity income funds only offer twice yearly or quarterly payments. Therefore, not only does the investment provide a high level of fixed income, but it also pays this on a monthly basis, which could be an important feature when looking to supplement existing income. At 5.04% p.a. on offer from the latest issue, this equates to 0.42% paid each and every month for the entire term of the plan.

Fixed term

The Enhanced Income Plan has a fixed term of six years and although you do have the option to withdraw your money early (and in this respect is not dissimilar to an investment fund), the plan is designed to be held for the full term and early withdrawal could result in you getting back less (or more) than you invested.

Many fixed rate savers will be used to a fixed term whilst this feature should also appeal to investors who wish to plan around this accordingly. Combined with a fixed and regular level of income, this also means that full plan terms are known at the outset and so investors can consider more clearly the risk versus reward prior to investing their capital.

Some capital protection from a falling market

The Enhanced Income Plan contains what is known as conditional capital protection, which means that the return of your initial investment is conditional on the FTSE 100 Index not falling by more than 50% below its value at the start of the plan. If the FTSE stays above this 50% barrier throughout the plan term, you will receive a full return of your original investment when the plan ends. However, if it falls below this level, and is also below its starting value at the end of the six year term, your initial investment will be reduced by 1% for every 1% fall. Therefore this plan puts your capital at risk and you could lose some or all of your initial investment.

The use of averaging

When calculating the final level of the FTSE for the purposes of comparing it with its value at the start of the plan, the plan takes the average of the closing levels of the Index on each business day during the last 6 months of the plan term. The use of averaging can reduce the adverse effects of a falling market or sudden market falls whilst it can also reduce the benefits of an increasing market or sudden increases in the market during the last six months of the plan.

Credit ratings and agencies

This plan is a structured investment and so unlike investing in a fund where you would buy units at the prevailing price on the date of purchase, your initial capital is used to purchase securities issued by Investec Bank plc. These securities are structured in a way so that they aim to provide the fixed income and the return of capital as described above, and means that Investec Bank plc’s ability to meet their financial obligations becomes an important investment consideration. If the bank fails or becomes insolvent, this could affect both the payment of any future income, as well as the return of your original investment and you would not be covered by the Financial Services Compensation Scheme for default alone.

Fitch is one of the main global credit rating agencies and has awarded Investec Bank plc a credit rating of BBB with a stable outlook (awarded 3rd October 2016). The ‘BBB’ rating denotes a good credit quality and indicates that expectations of default risk are currently low and that Investec Bank plc’s capacity for payment of its financial commitments is considered to be adequate but adverse business or economic conditions are more likely to impair this capacity. The stable outlook indicates that the rating is not expected to change in the short to medium term, i.e. in the next 6 months to 2 years.

Investec Bank plc profile

Investec is an international specialist bank and asset manager with its main operations in the UK and South Africa. Established in 1974, they currently employ around 9,000 people and as at 31st March 2016, look after £121.7 billion of customer assets. They provide a range of financial products and services and specialise in a number of areas, particularly within the banking sector. Their banking operation looks after £24.0 billion of customer deposits and they are also a market leading provider of investment plans and structured deposits in the UK.

Risk v reward

The principle of risk versus reward means that the search for potentially higher returns leads us to consider putting our capital at risk. A good benchmark for assessing your investment is to compare what you could get from a fixed rate deposit (capital protected) over a similar timeframe, and then consider whether you are comfortable with the risk to capital you are taking in order to receive the opportunity for a higher return.

Our leading five year fixed rate bond is currently offering 2.01%, and so by accepting risk to your capital, you are increasing your fixed return by 3.03% a year (since the fixed income from this investment is 5.04% p.a.). With the savings market failing to meet the need for higher income, the decision is whether you are comfortable with putting your capital at risk and the conditional capital protection offered, in order to achieve the higher return.

Fair Investment view

Commenting on the plan, head of savings and investments at Fair Investment Company Oliver Roylance-Smith said: “One of the main attractions with the Enhanced Income Plan is the ability for potential investors to consider its risk versus reward prior to investing. The plan pays a fixed income, each month, for a fixed term – so you know exactly what you will receive, when, and for how long – whilst you get your capital back at the end of the term unless the FTSE has fallen by more than 50%.“

He continued: “Compared to other income investments, this defined return for a defined level of risk could be attractive whilst the monthly income and fixed income features are often high up on the list of priorities for income seekers.”

The plan is open for new ISA investments up to the £15,240 allowance, Cash ISA and Stocks & Shares ISA transfers, as well as non-ISA investments. The minimum investment is £3,000.

Click for more information about the Investec FTSE 100 Enhanced Income Plan »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

This investment does not include the same security of capital that is afforded to a deposit account. Your capital is at risk.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

This is a structured investment plan that is not capital protected and is not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

Lifetime ISAs explained – the story so far

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One of the most interesting developments to come out of this year’s Budget is the announcement of a new category of ISA, the Lifetime ISA. Although some of the detail is yet to be finalised, we should all take note of the potential for a bonus of up to £32,000 in cash from the government, and so here we take a quick tour of what we know so far…

ISA allowance

Lifetime ISAs are due to launch in April 2017, which coincides with another significant increase in the ISA allowance, as it rises from its current level of £15,240 to £20,000 from the start of the next tax year. So whilst all contributions into a Lifetime ISA will count towards the total amount you can contribute into an ISA, savers will have another £4,760 of ISA allowance at their disposal.

Lifetime ISAs

The Lifetime ISA will provide a new way for those aged between 18 and 40 to save for both the purchase of their first property and their retirement simultaneously, with both cash and investment versions to be available. In addition to benefitting from the tax-advantages of an ISA, savers who use the account in certain ways could also retain a 25% bonus from the government on their contributions.

Who can use them?

To qualify you simply need to be aged 18 or over and under 40 on the date you open an account. They can be taken out in addition to a standard Cash or Investment ISA, as well as the current Help-to-Buy ISA. You can also open a Lifetime ISA even if you already own a property.

How will they work?

From its launch eligible savers will be able to contribute up to a maximum of £4,000 a year into a Lifetime ISA, however contributions made into the account before the holder’s 50th birthday will be eligible to receive the 25% government bonus – this essentially means they could gain an additional £1 for every £4 saved. This bonus element is not included as part of your annual ISA allowance.

The account will therefore have a maximum individual contribution limit of up to £128,000 (if you put in the maximum amount of £4,000 for every year between ages 18 and 50) which can be matched by the government bonus to a maximum of £32,000, giving a total of £160,000. The bonus will also be added each year, so you can earn interest or investment growth on it thereafter.

Getting the bonus payment

In order to retain the 25% bonus payments there are specific rules about how and when the savers need to use the capital within the account. Two scenarios are eligible, the first being anyone under the age of 60 using the proceeds towards purchasing their first property, and the second is anyone over the age of 60 using the funds to support their retirement.

Property purchase

Before the account holder is aged 60 years or over the only way to receive the bonus on their savings is to use the money within the account to purchase a property as a first-time buyer, either outright or using it for the deposit on a mortgage. In this instance the money will be paid directly to the person carrying out the conveyancing for the new home.

A first-time buyer is considered someone who has never owned property before whether in the UK or elsewhere, and in order to receive the bonus the property is also restricted to having a maximum value of £450,000 no matter where it is in the country. This is different to the current Help-to-Buy ISA which limits the property value to £250,000 if outside of London. The buyer must also be intending to live within the property so investment properties such as Buy to Lets would not be eligible for the bonus.

As the Lifetime ISA is an individual product couples are permitted to have one each, which means that a couple could generate up to £64,000 in a bonus payment towards the acquisition cost of their first home. In cases where one member of a couple has previously owned property but the other has not, they will still be able to benefit from one member using their Lifetime ISA to help fund the purchase.

In ‘retirement’

Once the account holder reaches 60 years old they will be able to receive the bonus upon any full or partial withdrawal. The account proceeds can be used for any purpose and will be paid free of tax. Funds can also remain invested and any interest and investment growth will continue to be tax-free – this includes any capital left over in the account if the Lifetime ISA holder already used it to fund a ‘bonus-eligible’ first property purchase.

Other withdrawals

Savers looking to make a withdrawal before their 60th birthday for reasons other than their first property purchase will be permitted to do so, but they will have to repay all the money added to the account by the government. They will also incur a 5% charge upon the amount withdrawn – an early redemption penalty.

Lifetime ISAs and Help-to-Buy ISAs

You can have both a Help-to-Buy ISA and a Lifetime ISA, however you are only permitted to use the bonus of one of the accounts to purchase property. Before Lifetime ISA’s launch it is also possible to save with a Help-to-Buy ISA in the meantime and then transfer it into a Lifetime ISA when they launch.

Fair Investment view

Commenting on the Lifetime ISA, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited said: “The idea of a 25% uplift towards a deposit for buying your first home will be attractive to some, but it is those with half an eye on their retirement years that could really benefit. Building up a pot in a tax-efficient environment over which you have complete control as to how much you take out and when is an attractive proposition. Add in the 25% bonus and the fact that any interest or investment growth will be compounded over time, and you could potentially end up with a sizeable tax-free pot to complement any other retirement provision.”

He continued: “Assuming you started your Lifetime ISA at age 35 and paid in £4,000 each year for the next 15 years, which would have another £1,000 per year added to it by the government. Not only would you have received £15,000 in bonus payments, but if your fund had grown at 5% each year (net of charges), at age 60 your pot would be worth almost £200,000, all of which would be available to take completely tax free, as and when you wish.”

 

Click here to compare our selection of Cash ISAs »

Click here to compare our selection of Help-to-Buy ISAs »

Click here to compare our selection of Investment ISAs »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular plan. The example used in this newsletter is for indicative purposes only and all funds will contain their own risk element in relation to growth and performance. If you are at all unsure of the suitability of a particular product, both in respect of its objectives and its risk profile, you should seek independent financial advice. Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

Our 10 best last minute ISA ideas

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With just one week to go until the deadline for using your 2015/16 ISA allowance of £15,240, this really is your last opportunity to make use of this valuable tax break and help protect your returns from the taxman. If you are yet to make use of some or all of your allowance, here we give you our 10 best last minute ISA ideas. Including both Cash ISA and Investment ISAs, as well as opportunities where you can include your 2016/17 ISA allowance (£15,240) as well, there should be something for everyone.

1.   Our best-selling Investment ISA

For those looking for growth but also with the opportunity to mature early or ‘kick out’ each year, the Enhanced Kick Out Plan offers 11.50% for each year invested provided the FTSE 100 Index at the end of each year is higher than its value at the start of the plan (subject to averaging). Capital is at risk if the FTSE falls by more than 50%. This is our best selling Investment ISA during the current ISA season and also features a Double ISA option.  Click here for more information »

2.   Fixed income Investment ISA

The Enhanced Income Plan is a regular ISA season top seller, paying a fixed income of 5.28% per year regardless of what happens to the stock market. The plan also has monthly income payments, so you know exactly how much you will paid, when, and for how long. Capital is at risk if the FTSE 100 Index falls by more than 50%. This plan features a Double ISA option.  Click here for more information »

3.   Self-select Investment ISA top seller

Barclays Stockbrokers has been voted ‘Best Execution-Only Broker’ at the Shares Awards 2015 whilst they have also been voted Self Select ISA Provider of the Year 2016 at the ADVFN International Financial Awards. Their investment ISA offers over 2,000 funds as well as a wide range of other investments including shares, exchange traded funds, investment trust, gilts and bonds.  Click here for more information »

4.   Defensive Investment ISA best seller

The Defensive Growth Plan from Investec offers a fixed return of 36% (equivalent to 5.25% compound annual growth) plus a return of your original capital, provided the FTSE 100 Index has not fallen by 50% or more at the end of the investment term. If it has, no growth will be achieved and your capital will be reduced by 1% for each 1% fall. This plan also features a Double ISA option.  Click here for more information »

5.   Income Investment ISA top seller

The FTSE Quarterly Contingent Income Plan pays a quarterly income of 1.875% for each quarter the FTSE 100 Index does not end less than 25% below its value at the start of the plan. So even if the FTSE falls up to 25% each quarter, you would still achieve 7.50% annual income. Capital is at risk if the FTSE has fallen by more than 40% at the end of the investment term. This plan features a Double ISA option.  Click here for more information »

6.   Managed and regular saver Investment ISA

The Standard Life Stocks & Shares ISA includes their ‘Easy Option ISA’, which allows investors to invest in one of their MyFolio Managed Funds run by a team of experts at Standard Life Investment Ltd. You can manage your account online and your ISA can be opened from just £50 per month with transfers from other ISAs permitted.  Click here for more information »

7.   Defensive supertracker Investment ISA

Defensive plans remain popular and the FTSE Defensive Supertracker from Meteor tracks any growth in the FTSE during the plan term and then trebles it, subject to a maximum growth return of 60%. The plan is defensive since the growth is based on any rise above 80% of the FTSE’s value at the start of the plan – that’s a 60% return even if the FTSE ends the same. Capital is at risk if the FTSE has fallen by more than 40%. This plan also features a Double ISA option.  Click here for more information »

8.   Instant access Cash ISA

For savers looking to combine a top interest rate with access to their money at all times, the Easy Access ISA from AA offers a simple, bonus-free savings rate of 1.25% AER variable. The account can be opened and managed online with just £100 and there are unlimited free withdrawals. The account also accepts transfers in. There are no penalties, notice periods or tiered interest rates, whilst interest is calculated daily and paid in March each year.  Click here for more information »

9.   Fixed rate Cash ISA

If you are looking for the reassurance of a fixed savings rate and don’t need access for your money for at least a year, fixed rate Cash ISAs are a popular option. The 1 Year Fixed Rate Cash ISA from AA currently offers 1.35% AER fixed and can be opened with a single deposit of £500. The account also accepts transfers in. Withdrawals are not permitted and 90 days loss of interest will apply if you access your money during the fixed term. You can apply and manage your account online whilst interest is calculated daily and paid at the end of your 12 month fixed rate period.  Click here for more information »

10.  Help to Buy Cash ISA

First time buyers can benefit from a 25% bonus of their Help to Buy ISA balance with a minimum bonus of £400 (so you need at least £1,600 saved) and a maximum of £3,000 (on a savings balance of £12,000) although you can have more saved. That means for every £200 you save HM Government will add £50, up to a maximum of £3,000. Eligibility criteria and Help to Buy: ISA Scheme Rules apply. Also note that any funds withdrawn before closing the account will not count towards the Government Bonus. The Nationwide Help to Buy: ISA is currently offering 2.00% AER variable with a minimum opening balance of £1.  Click here for more information »

 

Click here to compare Cash ISAs »

Click here to compare Investment ISAs »

Click here to compare our Top 10 Investment ISA plans »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. Fair Investment Company does not offer advice and any investment transacted through us in on a non-advised basis. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors. The past performance of the FTSE 100 Index is not a guide to its future performance.

Some of the investments mentioned are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. ISA transfer charges may apply, please check with your provider.

2016 ISA season selections – our Top 5 Investment ISAs

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With well under a month to go, time is running out to maximise the valuable tax benefit of your ISA allowance before the deadline on 5th April 2016, otherwise it will be lost forever. This has already been a very busy ISA season, and with Cash ISA savings rates continuing at uninspiring levels, it is perhaps not surprising that last season’s rise in the number of Stocks & Shares ISAs is a continuing trend. With the need to review existing ISAs, as well as making sure any new ISA investments offer the opportunity for competitive returns, we bring you our most popular Investment ISAs.

Our Top 5 Selections

Below we have listed some of our most popular Investment ISA plans, featuring both income and growth investments. With income needs continuing to play a critical role for many investors, the attraction of having tax free income is understandable. Whilst for investors looking for growth, included are those plans which take a defensive view on the stock market, as well as investments with the opportunity to mature early or ‘kick out’. Our head of savings and investment, Oliver Roylance-Smith, also offers a Fair Investment view for each plan.

Your ISA allowance

The ISA allowance for the current tax year is £15,240, whilst all of the plans detailed below accept Cash ISA and Stocks & Shares ISA transfers. Each plan also offers a Double ISA option, whereby you can invest the current tax year ISA allowance and next tax year’s ISA allowance (2016/17 tax year ISA allowance is also £15,240) via one application form – thereby offering the opportunity to invest up to £30,480 into new ISAs. Please check the individual plan for further details and for any application deadlines that apply.

Potential for 11.50% annual growth

With the potential for double digit returns and the opportunity to mature early from year one onwards, the Investec Enhanced Kick Out Plan has been our best selling Investment ISA this year. The plan will return 11.50% annual growth (not compounded) provided the value of the FTSE 100 Index at the end of each year is higher than its value at the start of the plan (subject to averaging). Your initial capital is at risk if the Index falls by more than 50% during the term, and also finishes below its starting value, in which case your capital will be reduced by 1% for each 1% fall.

Fair Investment view: “Depending on your view of what will happen to the FTSE, the ability to achieve 11.50% annual growth, even if the Index stays relatively flat, perhaps helps to explain why this plan has proved so popular. The current issue also sees the highest potential return on offer from this plan since 2012, so if the combination of high growth returns, the ability to mature early, as well as some capital protection against a falling market sounds appealing, this might make for a compelling opportunity in the current investment climate.”

Click here for more information »

 

Up to 7.50% annual income

The FTSE Quarterly Contingent Income Plan from Focus offers a quarterly payment of 1.75% during the plan if at the end of each quarter, the value of the FTSE 100 index has not fallen more than 25% from its value at the start of the plan. Therefore, the Index can fall up to 25% at the end of each quarter and you would still receive 7.50% annual income, but if the Index falls by more than this, no income would be paid for that quarter.

Your initial investment is returned at the end of the plan provided the FTSE has not fallen by more than 40%, measured at the end of the fixed term only. If it has fallen below this level, capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.

Fair Investment view: “Those seeking income from their investments often put the potential yield and frequency of payments as their top priorities, so the headline yield of up to 7.50% is attractive and the cap on any income is balanced against the conditional capital protection thereby offering an attractive balance of risk v reward. It’s has been a while since we’ve been able to talk about the potential for up to 7.50% income from a plan based on the performance of the FTSE, and compared to other income alternatives available in the market, this plan could offer an attractive option.”

Click here for more information »

 

5.28% fixed income each year

Our next plan is from Investec and is our best selling income investment this year, for both ISA and non-ISA investors. The current issue of the Enhanced Income Plan pays a fixed income of 5.28% per year, with monthly payments of 0.44% paid to you regardless of the performance of FTSE.  Capital is at risk if the FTSE falls by more than 50% during the investment term. If it does, and the Index also finishes below its starting level then your original capital will be reduced by 1% for each 1% fall, so you could lose some or all of your original investment.

Fair Investment view:One of the attractions of an ISA is that it allows income to be generated that would otherwise be subject to income tax, whilst the Enhanced Income Plan offers a high fixed income that is paid to you regardless of the performance of the stock market. Knowing exactly how much you will be paid, when and for how long are clearly features that could appeal, whilst the monthly payment frequency is usually the most sought after. The combination of a regular fixed income and a return of capital unless the FTSE 100 Index falls by more than 50%, could offer a competitive balance of risk versus reward that might be considered by both savers and investors.”

Click here for more information »

 

36% return even if the FTSE falls up to 50%

Defensive plans offer investors a competitive return on their capital even if the stock market fails to go up. As a result, they have risen in popularity in the last few years and the recently launched Defensive Growth Plan from Investec is no exception. The plan offers a fixed return of 36%, provided the FTSE 100 Index at the end of the term, is more than half of its value at the start of the plan (subject to averaging). So the FTSE can fall up to 50% and you still receive a fixed growth return of 36%, equivalent to 5.25% compound annual growth. If the FTSE falls by 50% or more, no growth will be achieved and your initial capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.

Fair Investment view: “Whilst the FTSE continues at what are still historically high levels, it is understandable why many investors are considering defensive investment plans and with a product headline of a 36% growth return unless the FTSE 100 Index falls by 50% or more, the risk versus reward of this plan is relatively easy to understand. So depending on your view of what might happen to the FTSE in the medium term, the ability to produce over 5% compound annual growth provided the market does not fall 50%, could make for an innovative investment opportunity.”

Click here for more information »

 

Triple the rise in the FTSE above 80% of its starting value

Following this defensive theme is our most popular ‘supertracker’ plan, the FTSE Defensive Supertracker from Meteor. The ‘supertracker’ part means your investment tracks any growth in the FTSE 100 Index during the term of the plan and then triples it, whilst the plan is ‘defensive’ since this growth is based on any rise above 80% of the FTSE’s starting value. Therefore, provided the FTSE has not fallen by more than 20%, you will receive triple any growth, subject to a maximum return of 60%. Therefore, this maximum return is achieved provided the FTSE ends the same or higher than its value at the start of the plan.

If the FTSE has fallen by more than 20%, no growth will be paid and your original investment will be returned in full unless the FTSE has fallen by more than 40%. If it has, your capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.

Fair Investment view: “For those investors concerned about the historically high level of the FTSE and would therefore like to include a defensive element to their investment, this plan offers the opportunity for investment level returns not only if the FTSE goes up, but also if it stays flat or even goes falls up to 20%. By combining this with some capital protection should the stock market fall, this plan could offer a compelling balance of risk versus reward for those who are not confident that the FTSE will rise significantly in the medium term.”

Click here for more information »

 

Important reminder – why do an ISA?

One of the main reasons for using an ISA is it’s tax treatment since no tax is payable on the income you receive, or any capital gains that you make, and there is also no need to declare any ISA income or capital gains on your tax return. They therefore provide tax efficient income or growth on your investment, the benefit of which can be compounded over time. See our Top 10 Tips for ISA season for further help and tips on how to make the most from this important time of year. Please also note that with all of these investments, our experienced Investment Customer Services team is available on 0845 308 2525 to answer any questions you may have.

How to apply

When you click for more information on any of the above plans you will be able to request a brochure pack which will be sent to you by post and email. This will include everything you need to invest, whether applying for an ISA, transferring existing Cash ISAs and/or Stocks & Shares ISAs or making on-ISA investments. Also note that these plans have different application deadlines, and may also close early so it is important to submit your application as soon as possible. Minimum investments and arrangement fees also apply.

Click here to compare Investment ISAs »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

These are structured investment plans which are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

Tax free income using your ISA allowance

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With only 5 weeks until the end of the tax year, time is running out to maximise the valuable tax benefit of your 2015/16 ISA allowance, before it is lost forever. We have been helping ISA savers for well over a decade, and history shows us that many investors will be looking for the opportunity to receive tax-free income from their ISA allowance. With the current tax year ISA limit of £15,240 only available to use before 5th April, now could be a great time to make the most of tax-free income opportunities, as well as looking towards income ISA options for the new tax year ahead.

Why seek income from your ISA allowance?

When it comes to investing, generating an income is one of the most common demands we put on our capital, and so the opportunity to receive tax-free income is one that investors will not want to miss out on. As record low interest rates continue, and the returns available from fixed rate bonds remain largely unappealing, many are considering taking on more risk with their capital. Therefore, it is perhaps understandable why many investors are turning to income generating investment opportunities. Using your ISA allowance allows you to receive this income tax-free, thereby protecting more of your hard-earned capital from the taxman.

Take advantage of ISA transfers

Another priority at this time of year is to review your ISA transfer options. Reviewing any existing ISAs is sensible to do at regular intervals, to make sure you don’t squander the valuable tax efficient benefits of your ISA savings. Checking for low interest bearing Cash ISAs or poorly performing Investment ISAs is a prudent measure, and if you find that your current ISA is no longer offering a competitive deal, most ISAs permit you to transfer existing ISAs to them without charge – although don’t forget to check whether there are any penalties from your existing provider.

Frequency of income payments

There are many options to consider when seeking income from your capital via an ISA, including the level of income offered, degree of risk, and frequency of income payments. Investments can offer the option of annual, bi-annual or quarterly payments, but for those seeking regular income, a plan which offers monthly income payments is often the most appealing.

Defined return, defined risk

We feature two plans below, both of which offer you a defined return for a defined level of risk, which means that you know the exact terms of each plan prior to investing, and exactly what needs to happen in order to provide you with the stated returns. They also include what is known as conditional capital protection, whereby your original capital is returned at the end of the plan term, as long as the underlying investment has not fallen by more than a specified amount, normally a percentage of its starting value.

Investors can then decide based on the likelihood of this happening in combination with the income on offer. This is a unique feature of structured investments and is in contrast to other income investments where your capital is exposed to day to day stock market risk and fluctuations in value. As savers continue to face the impact of record low savings rates, this feature could be an attractive option for those considering taking on investment risk with some of their capital.

Tax-free income options using your ISA allowance

All of the investment plans featured on www.fairinvestment.co.uk are available as New ISAs and accept ISA transfers (as well as non-ISA investments) although note any application deadlines that may apply. The income paid from an investment held within an ISA is not then subject to tax, thereby resulting in the potential for an attractive stream of tax free income. To help you compare ISA investment options for income, here are two of our ISA season income best-sellers:

5.28% fixed income, monthly payments

The FTSE 100 Enhanced Income Plan from Investec has been one of our best selling income investments for a number of years, and it is particularly popular during the ISA season. The main appeal of the plan is that it offers a fixed income which is paid to you each month, regardless of the performance of the FTSE 100 Index. The annual income is currently 5.28% (paid as 0.44% each month).

The plan will also return your initial capital at the end of the term unless the FTSE falls by more than 50% during the plan term. If it does, and fails to recover by the end of the term, your initial capital will be reduced by 1% for each 1% fall, so you could some or all of your initial investment.

Fair Investment view: “One of the attractions of an ISA is that it allows income to be generated that would otherwise be subject to income tax. Should you invest in this plan directly (i.e. outside of an ISA), the income would normally be subject to income tax. Using your ISA allowance therefore offers basic rate tax payers the equivalent of 6.60% each year, and for higher rate taxpayers this rises to 8.80%.

The high level of fixed income and the monthly payment frequency are popular features and combined with a fixed term, means the investor knows exactly how much they will be paid, when, and for how long, whilst also having some capital protection against a falling stock market. The current issue of the plan also offers a Double ISA option, with the opportunity to invest using both your 2015/16 and 2016/17 ISA allowances.”

Click here for more information on the Investec FTSE 100 Enhanced Income Plan »

 

Up to 7.0% yield, quarterly payments

The Focus FTSE Quarterly Contingent Income Plan offers the potential for up to 7.0% annual income dependent on the performance of the FTSE 100 Index. The plans pays a quarterly income of 1.75% provided the value of the Index at the end of each quarter has not fallen by more than 25% from its value at the start of the plan. If the Index is below this level, no income would be paid for that quarter.

Your initial capital is returned at the end of the plan provided the FTSE has not fallen by more than 40%, measured at the end of the fixed term only. If it has fallen below this level, your capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.

Fair Investment view: “It’s has been a while since we’ve been able to talk about the potential for up to 7.0% income from a plan based on the performance of the FTSE, but the latest issue of this popular income investment offers exactly that. The 25% barrier means that the FTSE can fall up to 25% at the end of each quarter and you would still receive 7.0% annual income. With typical yields on UK equity income funds feeling the strain at the moment, this investment could be a timely addition to those seeking high yield investment opportunities.”

Click here for more information on the Focus FTSE Quarterly Contingent Income Plan »

 

Don’t miss out – use it or lose it…

For those looking for income it has perhaps never been more important to manage your savings and investments carefully, and making the most of your tax-free ISA allowance should be a top priority. With only 5 weeks to go until the end of the tax year and the ISA investment deadline, it’s important to make the most of this opportunity, as well as planning ahead to maximise your tax-free income for the forthcoming tax year.

The income investments detailed above are available for individuals to use their ISA allowance and will also accept ISA transfers (from both Cash ISAs and Stocks & Shares ISAs) and non-ISA investments, with minimum investments from £3,000. The current issues of both plans also offer a double ISA option, so investors can use this year’s and next year’s ISA allowance on one application form. For the current tax year (2015/16) the annual New ISA allowance is £15,240 and this is also the limit for the next tax year (2016/17) which starts on 6th April 2016. You can therefore invest up to £30,480 into new ISAs that give you the opportunity to receive a regular tax free income.


Click here to find out more about the Investec Enhanced Income Plan »

Click here to find out more about the Focus FTSE Quarterly Contingent Income Plan »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment of ISAs depends on your individual circumstances and legislation which are subject to change in the future. ISA transfer charges may apply, please check with your provider.

Structured investment plans are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to their future performance. These investments do not include the same security of capital as a deposit account.

Top 10 Tips for 2016 ISA season

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With only 7 weeks until the end of the tax year, now is the time to consider making good use of your ISA allowance if you have not done so already. Considering ways to shelter your hard earned cash from the tax man should be a top priority, and so there’s no time to waste in making sure you review existing ISAs as well as maximise any New ISA opportunities. This makes the period between now and the end of the tax year an important time for savers and investors, so to help you make the most of your ISA allowance, we’ve put together our Top 10 tips for the 2016 ISA season.

Tip 1 – Don’t miss the ISA deadline

Before you do anything else ISA-related, make sure you know all the relevant deadlines. The main deadline to remember is 5th April since this marks the end of the tax year and is the latest date for using your ISA allowance within the current tax year (2015/16). Remember that you cannot backdate your 2013/14 ISA allowance once this deadline has passed – if you don’t use it, you lose it.

Tip 2 – Don’t miss any other deadlines

Also look out for other deadlines which may apply. Many ISA providers will need your application – and possibly your cleared funds – before this date. Additionally, some ISA plans have an earlier deadline for ISA transfers whilst some offer limited funding and may close early if they become oversubscribed.

Tip 3 – Maximise your ISA allowance

Your total ISA allowance for 2015/16 is £15,240. You can put the entire allowance into an Investment ISA (Stocks & Shares ISA), or the entire allowance into a Cash ISA. If you decide to use some of the allowance in one type of ISA, you can also put any remaining balance into the other type. Also remember that these allowances are per person, so a couple can invest up to £30,480 in total before midnight on 5th April 2016.

Tip 4 – Consider maximising next year’s ISA allowance

Some of the deposit and investment plans available from Fair Investment have an application offer period which ends after the new tax year has begun. Investec for example have Double ISA functionality on all of their current plans which means you can apply for both 2015/16 and 2016/17 tax years through one application. The 2016/17 ISA allowance remains unchanged at £15,240 so you could invest up to £30,480 per individual if you are yet to use your current year allowance. That’s £60,960 per couple, so why not make the most of your ISA and maximise your allowance at the earliest opportunity.

Tip 5 – Understand what your ISA could achieve

When considering why to try and maximise your ISA allowance, apart from sheltering your income or growth from the tax man, it is important to understand how much you could achieve over time. For example, if you had invested the maximum into an Investment ISA since the 1999/2000 tax year, and it had grown at 7% each year, you would now have a lump sum of over £270,000. This is a significant amount, a large part of which would normally have been subject to income tax and/or capital gains tax.

Tip 6 – Think about tax free income

Income is a top priority for many considering the options available with their capital, and so the ability to receive tax free income from ISA investments is an obvious route to consider. For those subject to the minimum 20% income tax rate for example, this takes a headline return of 5% down to 4%, which based on £10,000 over 5 years equates to a difference of nearly £600 in your pocket. For a higher rate taxpayer the situation is even worse, taking your 5% down to 3%, which equates to a difference of nearly £1,200. Please note that the tax efficiency of ISAs is based on your individual circumstances and current tax law which are subject to change in the future.

Tip 7 – Check your existing ISAs

It’s not in your ISA provider’s best interests to offer you the best deal year after year, and don’t rely on them making sure you are aware that your introductory or fixed rate has gone down or that a better account or alternative investment is available because it probably won’t happen, even if it is available from the same provider. Savings rates still remain at record lows and once you’ve deposited your hard earned cash, your ISA provider knows from experience that you’re unlikely to get round to switching providers even if your rate ceases to be competitive. Don’t be that person! It’s down to you to review your existing ISAs, check the rates you are receiving and how your investments have performed, and then compare it with a wide range of other options on offer.

Tip 8 – Take a risk check

Cash ISAs protect your initial capital (and your initial deposit is normally covered by the FSCS) and offer either a fixed or variable return, whilst Investment ISAs put your capital at risk but with the opportunity to achieve higher returns. Generally the greater risk you take with your capital, the higher the potential rewards. With record low interest rates forcing many ISA savers to consider taking on more risk with their capital in the hunt for higher returns, now is also a good time to review the risk versus reward on offer from both your existing ISAs and any new ISAs you are considering.

Tip 9 – Don’t forget the transfer option

Whilst for many years you could only transfer from Cash ISAs to Investment ISAs, this limitation has now been removed. This greater flexibility brings with it a wider range of options to consider since you can now transfer all previous ISA holdings, regardless of whether they are in a Cash ISA or an Investment ISA, into a single ISA. Remember though to never simply take your money out of an Investment ISA as you will lose all of the tax benefits and moving it back into an ISA will count as a new subscription, even if this is done in the same tax year. Please also check with your existing ISA provider whether any charges apply on transferring.

Tip 10 – Maintain your ISA at all costs

Whilst your savings and investments remain in their tax-efficient ISA ‘wrapper’, the benefits become more and more valuable over time as the compound effect of not paying tax each year builds and builds. This is why not only should you try and maximise your ISA allowance each year, but you should also aim to make sure your ISA is the last money you dip into since as soon as you take money out of your ISA, it loses these benefits and starts to become subject to tax.

Review ALL of your options

The range of ISA options to choose from is significant and growing day by day in the run up to 5th April. As the end of the tax year approaches, Cash ISA providers in particular will try and persuade you that their offering is the best destination for your hard-earned money, despite this being a period of record low savings. With an increased allowance, wider investment options and greater transfer flexibility, making sure you do your research and consider ALL of your options very carefully indeed is as important as it’s ever been. Fair Investment provides opportunities across both Cash ISAs and Investment ISAs and our wide range of options is constantly being updated to reflect a selection of the best the market has to offer.

Compare our latest Cash ISA selections »

Compare our latest Income Investment ISA selections »

Compare our latest Growth Investment ISA selections »

Compare our Top 10 NISA Investment Plans »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment of ISAs depends on your individual circumstances and legislation which are subject to change in the future. ISA transfer charges may apply, please check with your provider.

The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors.

New ISA allowance all wrapped up with our ISA season best seller

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The start of the new tax year brings with it a new and increased ISA allowance, which is open to every adult in the UK and is available right now. The recent Budget confirmed the ISA allowance would increase by inflation so the current 2015/16 tax year limit stands at £15,240 and has been available since 6th April. For investors looking for tax free income and who want to make the most of this new allowance straight away, we take a closer look at our most popular income plan during the recent ISA season and explain why it might be a compelling option for all those seeking income, both savers and investors alike.

Investors seeking income

Whether you are new to investing or a seasoned investor, the need to generate an income is one of the most common demands put on our capital and can cover a wide range of savings scenarios. If you are one such investor actively seeking income then this fixed income investment plan is certainly worth a closer look.

In a nutshell

For those who wish to get the tax year off on the right foot, the Enhanced Income Plan from Investec is our most popular income plan this ISA season. The current version offers investors a fixed income of 5.04% each year for a six year term and pays income to you each month (equivalent to 0.42% per month). Your capital is at risk should the FTSE 100 Index (‘the FTSE’) fall by more than 50% during the term of the plan and fails to recover by the end of the plan term, in which case you could lose some or all of your initial investment. This is known as conditional capital protection and is one of the investment plan’s main differentiators from other types of income investments.

A high fixed income

A fixed income is rather uncommon amongst income investments which normally offer a variable income based on prevailing market conditions and the performance of the underlying investments. This is therefore a popular feature since it provides investors with the knowledge of exactly how much income they will receive, when and for how long. When held within an ISA, the 5.04% fixed income is also paid tax free. This is equivalent to basic rate tax payers receiving 6.3% interest and higher rate tax payers 8.4%.

Compared to cash

Since this investment offers a fixed income over a fixed period, it is relatively easy to compare those elements with cash and a guaranteed return that you would receive from a fixed rate bond of similar duration (subject to the bank/deposit taker remaining solvent). Although there is not a market for six year fixed rate bonds there has historically been a healthy market for longer term fixed rates with five year fixed rates traditionally offering the higher returns as compensation for you committing your capital for longer. Unfortunately the market here has declined with leading rates currently offering no more than 2.50%. This investment therefore offers a premium of 2.54% in return for putting your capital at risk.

So the main question to consider is whether you are prepared to risk your capital in return for just over double the interest you could receive from the current market leading fixed rate Cash ISA, where the return of your capital at the end of the term is protected. Is the additional 2.54% income each year worth the risk that the FTSE may fall by more than 50%?

Compared to investment funds

Some of the yields available from investment funds certainly catch the eye, with many bond funds offering yields in excess of 5%. There are three main differences between the Investec fixed income plan and investment funds:

Variable income

The income from investment funds is not guaranteed and is dependent on the underlying holdings and market conditions. Since these will vary over time, so too will your income. The income from the Investec plan is fixed and so remains the same throughout the term.

Capital risk

The treatment of your capital is different to the Investec plan in that there is no conditional capital protection – your capital is fully at risk on a daily basis. This is important since the income yield and any rise or fall to your original capital should always be considered together since both have an effect on your overall return. For example a 6.60% income yield could be compelling in its own right but not so if it coincides with a 6.60% reduction in the value of your capital.

Diversification

An investment fund generally invests in a number of holdings and with bond funds this can sometimes be in the hundreds. This has the effect of spreading the risk of your investment so if one of the holdings fails or falls in value significantly, it has less of an impact on your overall return. Your investment into the Investec plan buys securities issued by Investec Bank plc only and so your income and return of capital is also dependent on their ability to meet their financial obligations. This means the credit rating of the Bank becomes an important consideration.

Also remember that investment funds have annual management charges (normally up to 1%) which have an impact on the overall performance. There are no annual management charges associated with the Investec Enhanced Income Plan.

Fair Investment conclusion

When considering income investments it is important to understand fully how each investment works and the risks it entails. Whether this is inflation risk, risk of capital loss or fluctuating yields, it should always be remembered that it is the income and capital loss/rise combined that produce your overall return and this is before tax is taken into consideration.

Commenting on the Enhanced Income Plan from Investec, head of savings and investments at Fair Investment Company Oliver Roylance-Smith said: “As an alternative to open ended investment funds, the defined return and defined risk offered by fixed term investments offer investors an alternative approach to achieving income and an often competitive balance of risk versus reward.”

He continued: “Their conditional capital protection means that your initial investment has some protection against a falling market and the high level of fixed income, monthly payment frequency and fixed term provide a range of features that could be attractive to both savers and investors. Which of these features is the most appealing will vary among investors, but could equally appeal to fixed rate savers prepared to put their capital at risk in return for a high fixed income.  Where else can you receive 5.28% fixed income each year, paid to you regardless of what happens to the stock market? It is therefore understandable why the Enhanced Income Plan from Investec Bank has been one of our most popular income investments.”

The plan is open for new investment ISAs (£15,240 limit), Cash ISA and Stocks & Shares ISA transfers and non-ISA investments with a minimum investment of £3,000.

Click for more information about the Investec Enhanced Income Plan »

Click here for our Select Range of bond income funds »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment depends on current legislation and your individual circumstances which may change in the future. Before transferring an ISA please check there are no penalties for withdrawal from your existing ISA provider.

The Investec Enhanced Income Plan is a structured investment plan that is not capital protected and is not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

ISA savers 2 minute guide to the Budget

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Further to last month’s Budget speech by the Chancellor, George Osborne, we give you a quick round up of the main changes around ISAs and what this will mean for both cash savers and investors.

New tax year, new limits – an even bigger allowance

From July last year, Mr Osborne significantly increased the annual ISA allowance to £15,000, allowing savers to squirrel more money away from the taxman than ever before; and because the allowance now rises in line with inflation, since 6th April 2015, the annual ISA investment limit for 2015/16 has risen by £240 to £15,240. Every UK adult gets their own allowance, so couples can save twice that amount. The limit for the Junior ISA (JISA) has also risen by £80 to £4,080.

Radically more flexible

A significant reform is that savers now have the freedom to withdraw and replace money in the same tax year without it counting towards their annual ISA allowance limit for that year, as long as the repayment is made in the same tax year as the withdrawal. This means ISA are now fully flexible so you can withdraw money without losing your tax benefits, provided you pay it back in by the end of the financial year. In the past, money taken out of an ISA lost its tax free status so any additional payments would count towards your ISA allowance for that tax year.

Junior ISA flexibility

In a change aimed at the younger generation, families who have taken out a child trust fund (CTF) can now convert it into a Junior ISA CTF’s were a tax-free savings wrapper for children born between 1st September 2002 and 2nd January 2011 which were replaced by the Junior ISA. Some CTFs have been unpopular with parents since they have combined disappointing performance with limited investment choice and high charges, although if you are considering transferring to a Junior ISA you will need to check that they are willing to accept the Child Trust Fund.

Passing on an ISA allowance

Further to an announcement made last December, married couples are now free to pass an extra ISA allowance, equal to the value of their ISA savings on death, to their surviving spouse. This means that couples can now pass the ISA tax breaks to each other however, passing the ISA tax status from parent’s to children is still not permitted.  When the surviving partner dies, they will continue to fall inside the family estate for inheritance tax purposes.

“Help to Buy” ISA

A new “Help to Buy” ISA scheme was also announced, aimed at helping first-time buyers get onto the property ladder. Under the scheme, for every £200 a first-time buyer saves, the Government will top up the deposit with £50 up to a maximum of £15,000 in total. So, if a first-time buyer saves £12,000, the Government will add a £3,000 ‘bonus’ to the pot. Savers will have access to this money and will be able to withdraw funds from the ISA account if they need them for another purpose, but the bonus will only be made available for those using the money for a home purchase. The Help to Buy ISA will only be available on houses worth £250,000 or less, or £450,000 or less in London.

And remember the additional changes in place since last year:

  • The ban on transfers from Stocks & Shares ISAs to Cash ISAs has been removed, thereby allowing full two-way transferability between deposits and investments and vice versa.
  • The rule which prevents more than 50% of the total limit being placed in a Cash ISA has been scrapped and so the entire £15,000 NISA contribution limit can go into cash deposits, or any combination of cash and stocks and shares.

Non-ISA changes

The Chancellor also confirmed tax breaks for non-ISA savings, via the introduction of a new “personal savings allowance” which will reward savers by not taxing the first £1,000 of savings income for basic rate savers, and the first £500 for higher rate taxpayers. Additional-rate taxpayers will not benefit. Mr. Osborne said that this reform would abolish the tax on savings for 17 million people.

Fair Investment view

Commenting on the Budget, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited said: “The addition of the £1,000 savings allowance has largely removed the benefit of increased flexibility for Cash ISAs and with savings rates as they are, many savers may now consider the use of a Cash ISA unnecessary. But investors and those looking to achieve the potential for higher returns than cash has been able to offer in recent years, are the real winners from this year’s Budget. The latest ISA reforms have left investment ISAs more generous, flexible and tax-efficient and a couple can now save up to £30,480 knowing that any income or capital gains will not be subject to tax in the future. Used in the right way, this could build up substantial sums in a relatively short period of time.”

For more information, see some of our most popular Investment ISA pages below:

Click here for our Top 10 NISA Investment Plans »

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No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular plan. If you are at all unsure of the suitability of a particular product, both in respect of its objectives and its risk profile, you should seek independent financial advice. Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.