Archive for the ‘ISAs’ 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…

 

Compare Cash ISAs »

Compare Income ISA investments »

Compare Growth ISA investments »

Compare ISA transfers »

 

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.

Top 10 tips for ISA savers and investors

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Since we have just passed the halfway point in the tax year, now is the perfect opportunity to review your ISA planning, whilst you still have plenty of time to do so. There are plenty of ISA opportunities out there, and since each of us (over the age of 16 for a Cash ISA, and 18 for an Investment ISA) has a healthy ISA allowance each and every year, this really should be a top priority for all savers and investors to review all existing ISAs as well as the wide range of options open to them. To help you act and act fast, our head of savings and investments, Oliver Roylance-Smith, has put together his Top 10 ISA tips, so there can be no excuse for missing out on valuable tax-efficient returns well before the end of the tax year…

Tip 1 – 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, which is the highest it has ever been. Also remember that this allowance is per person (over the age of 16 for a Cash ISA, and age 18 for an Investment ISA), so a couple can invest up to £30,480 in total this tax year.

Tip 2 – Consider the impact of current ISA savings rates

However, despite this generous ISA allowance it is not all good news, especially for cash ISA savers. This is because the increases to the ISA allowance in recent years has coincided with some of the lowest interest rates on record, so although there is the incentive to save, the deals on offer are far less attractive than the cash-based returns of yester-year. Therefore it is more important than ever to consider the potential impact of this on the overall returns from our capital and what impact this might have.

Tip 3 – Take a risk check

Cash ISAs protect your initial capital (and your initial deposit is normally covered by the Financial Services Compensation Scheme) and offer either a fixed or variable return, whilst Investment ISAs offer the opportunity for higher returns but place your capital at risk. Generally the greater risk you take with your capital, the higher the potential rewards and capital losses are.

Further to the Bank of England’s first base rate cut in seven years back in August, savers have again realised that the likelihood of any significant change to savings rates is very unlikely, and even when interest rates do start to rise there is no guarantee that this will be passed on to savers. Times have definitely changed, and this has resulted in the continued trend of record Investment ISA subscriptions as more and more ISA savers are in the hunt for higher returns. So now would be a good time to review the risk versus reward on offer from both your existing ISAs and any new ISAs you are considering.

Tip 4 – 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 (and additional) rate tax payers, or anyone who is or may in the future take a high amount of non-dividend income from their capital, 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, so you can use additional further funds towards this.

Tip 5 – Make full use of the ISA’s flexibility

Gone are the days when there was a different limit for Cash ISAs and Investment ISAs, and for the last couple of years there has been no restriction on the amount you can put into either type – so Cash ISA savers have enjoyed the full ISA allowance. This greater flexibility means that you can put the full ISA allowance into a Cash ISA, an Investment ISA, or a mixture of the two in any proportion you choose. This allows ISA savers to give careful consideration to balancing the risk versus reward of their ISA portfolio, whilst remaining safe in the knowledge that the benefits of not paying any tax increases over time – so the more you can put away each year, the more you are likely to benefit.

Tip 6 – Get ahead of the game

Despite it being only half way through the tax year, you should always have half an eye on the 5th April end of tax year deadline. We can all be guilty of putting off until tomorrow those things which could be done today, and we all know how quickly time can fly. Remember, you cannot backdate your allowance so if you don’t use it, you lose it. In addition, the earlier in the tax year you act, the more time your cash has the potential to benefit from the tax efficient returns.

Tip 7 – Think to the future

Needless to say that in the current financial climate, every penny counts – so why pay tax on money that you can protect from the tax man, both now and in the future? Money held in an ISA has the opportunity to build on the tax-efficient returns year on year. If you had invested the maximum into a Cash ISA since they were first introduced in 1999, and you had received 2.5% per year, at the end of this tax year you would have a savings pot of almost £120,000. If you put the maximum into an Investment ISA every year, and that had grown at 6% each year, you would see a lump sum of almost £279,000. Both are sizeable amounts, none of which would be subject to income tax 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.

Tip 8 – Always check your current interest rate

Rates change frequently and once you’ve deposited your hard earned cash, your ISA provider knows from experience that some of you are unlikely to get round to switching providers, even if your rate ceases to be competitive. Don’t be that person! Always check the rate you are currently receiving (this should be detailed on each statement) and compare it with a wide range of other options on offer. However good your ISA deal seems at the outset, it is likely that you will need to transfer your ISA fairly frequently in order for it to remain competitive.

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.

With such low interest rates, much of the increase in the numbers of Investment ISAs in the last couple of years has come from ISA transfers. The upside here is the potential for higher returns whilst the downside is that such returns are not guaranteed and your capital is at risk. Either way, don’t waste your ISA by keeping it in a low paying savings plan or poorly performing investment. There is a wide choice available.

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.

Start a new ISA or transfer your current ISA now

The current ISA allowance is available now and many of the savings accounts and investments available through Fair Investment Company are available as new ISAs and accept ISA transfers. So start as you mean to go on, review your options carefully and make sure you benefit from up to a half a year of extra tax-efficient returns by taking action now. This also means one less thing to worry about until 6th April next year…

 

Compare Cash ISAs »

Compare Income ISA investments »

Compare Growth ISA investments »

Compare ISA transfers »

 

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 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.

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.

Savings Focus: Investec Retirement Deposit Plan offering 3.75% each year

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Last updated: 08/11/2016

There’s no denying that the outlook for traditional Cash ISAs at the moment is bleak. Not only are savings rates at rock bottom, but banks don’t really want the additional cost of having to run the Cash ISA tax wrapper that goes with it – most high street banks simply do not want your Cash ISA money – and therefore for those that do, they only need to offer a low rate of interest to get it. For those looking for alternatives, this new launch Cash ISA from Investec Bank plc offers an interesting way to receive tax efficient withdrawals each year, combined with the potential to receive back an amount equal to your initial deposit at the end of the fixed term. Here we take a closer look to see how it stacks up.

Traditional Cash ISAs offering low returns

The banking and economic environment continue to create challenges for savers, brought about in the main by the impact of record low interest rates on our savings and our future. The current market for traditional Cash ISAs still offers some of the lowest rates ever seen. In fact, you are hard pushed to get much over 1.50% in return for tying up your money for five years, which is why many looking for a fixed rate are considering shorter term options.

Currently our most popular deals come from Aldermore Bank, paying 0.95% AER, 1.15% AER and 1.20% AER on their 1, 2 and 3 year fixed rates respectively. You can save from £1,000 and can transfer existing ISAs. Our leading instant access account is the AA Cash ISA Easy Access, paying 0.75% AER variable.

Cash ISA alternative – potential for higher returns

By linking the amount of capital that is returned to you at the end of the plan to the FTSE 100 Index, this structured deposit plan offers the potential for higher returns than those that are available from more traditional products such as fixed rate Cash ISAs. So the upside is the potential for higher returns, whilst the downside is that since your return is linked to the performance of the UK stock market, unlike a fixed rate it is not guaranteed. This is the trade off for the opportunity to receive higher overall returns.

Fixed payments of 3.75% each year

The Investec FTSE 100 Retirement Deposit Plan has a fixed term of 6 years and pays a fixed payment of 3.75% each year, paid to you regardless of what happens to the FTSE 100 Index. Over the six year term this equates to 22.5%.

Capital returned at the end of the plan

The aim of the plan is to withdraw fixed annual payments from your initial deposit over 6 years, and repay the remainder of your initial deposit plus an additional return at maturity. The amount of capital returned at the end of the plan therefore, is either the remaining 77.5% of your initial deposit, or the remaining 77.5% plus an additional return of 22.5%.

This additional return is paid provided the FTSE 100 is higher than 90% of its level at the start of the plan, so the Index could have fallen up to 10% and you would still receive this additional return. If the FTSE has fallen by 10% or more, the amount returned to you will only equal the remaining amount of your initial deposit (i.e. no growth will be achieved).

‘Defensive’ feature

Since the additional return on offer is dependent on the performance of the FTSE 100 Index, the defensive feature of the plan is an important one to understand. Rather than the Index having to finish higher than its value at the start of the plan, the Index can fall up to 10% and the fixed return of 22.5% is still paid.

The use of averaging

When calculating the final level of the FTSE 100 Index 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.

Returns compared

The 3.75% annual payment is well over double any fixed rate on offer from a traditional Cash ISA. However, it is important to remember that in the case of a traditional fixed rate Cash ISA, your initial deposit is always returned in full at the end of the fixed term. Although the annual payments from the Investec plan are fixed and paid each year, it is only if the additional return is paid at the end of the plan term would you be better off overall.

Capital protection

Since the plan is a structured deposit you will receive the remainder of your initial deposit back in full at the end of the six year term regardless of what happens to the FTSE 100 Index, and as long as the deposit taker for the plan, Investec Bank Plc, is able to repay your money. The bank’s ability to stay solvent and repay your capital is known as counterparty risk and is the same risk you take with any capital deposited with an institution with a UK banking licence.

In the event that Investec is unable to meet its liabilities, this deposit plan is eligible for Financial Services Compensation Scheme (FSCS) protection. Therefore, eligible depositors could be entitled to claim up to £75,000 per person.

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.

Cash ISA only

Please note that this plan is only available as a Cash ISA. The plan also accepts ISA transfers, from both Cash ISAs and Stocks & Shares ISAs and has a minimum deposit of £3,000 and the maximum deposit for a new current year ISA (2016/17) is the ISA limit of £15,240.

Fair Investment view

Commenting on the plan, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited, said: “There’s no getting around the fact that the rates on offer from traditional Cash ISA savings products remain at record lows, and this looks set to continue. This is a real challenge for savers. By combining capital protection, fixed annual payments and the potential for an additional 22.5% return at maturity, this new launch from Investec offers an interesting alternative. The best long term fixed rate Cash ISAs are currently only offering a little over 1.50%, so if this plan pays the growth return at maturity, your overall return will be well over double these top deals.”

He continued: “Both are treated the same for FSCS purposes (up to the usual deposit scheme limits) but unlike the fixed rate Cash ISA, the maturity payment on the Investec plan is dependent on the FTSE and is not therefore guaranteed. So if you are prepared to sacrifice a guaranteed rate of interest, then the potential higher returns on offer could be appealing in the current economic climate.”

This plan is open now for new ISA deposits up to the £15,240 allowance for the current tax year (2016/17), as well as Cash ISA and Stocks & Shares ISA transfers. The minimum investment is £3,000.

 

Click here for more information about the Investec FTSE 100 Retirement Deposit 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 is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring or switching an ISA.

This is a structured deposit plan that is capital protected. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial capital and any returns stated. In this event you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS), depending on your individual circumstances. In addition, you may not get back the full amount of your initial deposit 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.

AER stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.

Investment Focus: investment returns even if the FTSE falls 50%

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Last update: 27/09/2016

A defensive plan is simply a plan that is designed to provide an investment return even if the stock market fails to rise, or in some circumstances goes down slightly. They are therefore an option for those who would like the opportunity for investment level returns, but who are not confident the market will rise significantly in the medium term. The main feature of the Defensive Growth Plan from Investec is that returns are achieved even if the market has fallen by as much as 50% at the end of the fixed term. Here we take a closer look at the plan in order to find out why it has proved so popular with our investors.

The FTSE

Apart from a handful of days in 2015 and earlier this year, the closing level of the FTSE has been above 6,000 points since the start of 2013, and we have also seen the highest closing level on record (7,104 points), achieved towards the end of April last year. Whilst the FTSE has remained at what are historically high levels, defensive investment plans that offer the potential for investment level returns even if the stock market fails to rise or, in some scenarios, even falls slightly, have been an increasingly popular choice with our new and existing investors.

Defensive investments – a middle ground

Defensive investments attempt to offer investors the best of both worlds, by balancing less of the investment upside, with the opportunity to achieve these returns even if the market fails to rise. This means they are designed for investors who have a neutral or negative outlook of what could happen to the stock market in the coming years, and yet who would still like the opportunity to receive investment level returns. Based on the levels of the FTSE over the last few years, these arguably offer a compelling investment opportunity and Investec’s Defensive Growth Plan is one of our most popular.

In a nutshell

One of the latest additions to Investec’s highly competitive range of structured investment plans, the FTSE 100 Defensive Growth Plan offers a fixed return of 34% at the end of the six year term, provided the value of the FTSE at that point is equal to or higher than 50% of its value at the start of the plan (subject to averaging). Therefore, the FTSE can fall up to 50% and investors would still receive a 34% growth return, along with a full return of their original capital.

If the Index has fallen by more than 50% at the end of the term, 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.

34% return even if the FTSE falls 50%

This is a strong headline since investors will receive a positive return, even if the FTSE falls 50%. This means that even if you are not confident the FTSE will rise at all, you could still receive a fixed return of 34% unless the FTSE falls by more than 50%.

The ‘defensive’ feature

Since the fixed return on offer is dependent on the performance of the FTSE 100 Index, the defensive element of the plan is an important one to understand. Rather than the Index having to finish higher than its value at the start of the plan, the Index can fall up to 50% and the fixed return of 34% is still paid. Whilst the FTSE continues at historically high levels, this ‘defensive’ feature could be an appealing one.

The use of averaging

Whether the plan pays the 34% fixed return is determined by comparing the value of the FTSE 100 Index at the start of the plan with its value at the end of the plan or the ‘Final Index Level’. When calculating the Final Index Level 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.

Some capital protection from a falling market

Provided the FTSE 100 Index has not fallen by more than 50% at the end of the term, the 34% growth return is paid to you along with a full return of your initial capital. Should the Index have fallen by more than 50%, your initial investment is reduced by 1% for each 1% fall. It is important to note that in this scenario, you would lose at least 50% of your capital.

Since the market can fall up to and including 50% before your initial investment is at risk, the plan offers some capital protection against a falling market. This should be considered in conjunction with the potential return on offer when reviewing the plan’s overall risk versus reward.

Defined risk and defined returns

Another feature of this plan is that, as with all structured investments, the potential returns are stated up front, prior to investing. This allows the investor to consider the potential upside in the context of the amount of risk they are taking, since you know at the outset exactly what needs to happen in order to receive the stated level of growth as well as a return of your initial investment.

ISA only

Please note that this plan is only available as an ISA. The plan also accepts ISA transfers, from both Cash ISAs and Stocks & Shares ISAs.

Credit ratings and agencies

This plan is a structured investment and so your initial capital is used to purchase securities issued by Investec Bank plc. These securities are structured in a way so that they provide the growth and return of capital as described above, which 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 growth return 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 rated Investec Bank plc with a credit rating of BBB with a stable outlook (awarded 27th October 2015). 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.

Fair Investment view

Commenting on the plan, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited, said: “The ability to produce a 34% fixed return even if the market falls by 50% puts this plan in a category of its own, since most other defensive investments still require the FTSE to fall by no more than 20%.The risk versus reward of the plan is known at the outset and is relatively easy to understand, whilst by offering a competitive return even if the FTSE falls by up to half this plan is one of our best selling defensive investments. So for those who are not confident the stock market will continue to rise in the coming years, this plan could make for a compelling opportunity.”

The plan is open for New ISA investments up to the £15,240 allowance for the current tax year (2016/17) as well as Cash ISA and Stocks & Shares ISA transfers. The minimum investment is £3,000.

 

Click here for more information about the Investec FTSE 100 Defensive Growth 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 is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring or switching 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.

BREXIT and the FTSE: defensive investment plans rise to the challenge

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Last updated: 11/10/2016

The recent decision made by the UK to leave the European Union has unsurprisingly forced many investors to reconsider their options, especially since there remains so much uncertainty around the potential impact of this decision on our economic growth and stability. Regardless of whether you were for remaining or leaving, taking a view on what might happen to the FTSE in the short to medium term is certainly something on the minds of many. With this in mind, we take a look at a selection of defensive investments to find out exactly what they have to offer and how the risk versus reward might be appealing for those who are concerned about the impact Brexit may have on future investment opportunities.

What is a defensive plan?

Defensive plans offer the potential for investment level returns, even if the stock market goes down, in some cases by up to 50%. Partly as a result of the FTSE continuing at historically high levels in recent years, there has been an increase in the number of plans that offer a competitive return even in the event that the market fails to rise. These are commonly known as defensive investment plans and for those who are not confident that the market will continue to rise in the medium term, they have become an increasingly popular investment opportunity.

Different types

Although each plan has its own features, collectively they are growth investments which offer the potential for either a fixed return for every year invested (not compounded), or a fixed return at the end of the full term, both of which are dependent on the performance of the underlying investment, usually the FTSE 100 Index. Each of these investments will be structured to offer a defined return for a defined level of risk, and as such you will know from the outset exactly what must happen in order to receive the stated returns on offer.

A middle ground

Defensive investments therefore try and offer the best of both worlds by offering the potential for investment level returns, even if the underlying investment only rises by a small amount, stays flat, or goes down slightly. This means they are designed for investors who have a neutral or negative outlook of what could happen to the stock market in the coming years, and yet who would still like the opportunity to receive the potential for investment level returns. Here is a selection of the current range of defensive plans on offer:

Returns even if the FTSE falls up to 10%

If the FTSE had fallen by 5% in 3 years time and yet you still received 24.0% growth plus a return of your initial capital, would you consider this a good investment? The Investec FTSE 100 Defensive Kick Out Plan has a maximum term of six years but will kick out (mature early) at the end of each year from year 3 onwards, provided the FTSE is above 90% of its value at the start of the plan. If it is, then you will receive 8.0% for each year invested (not compounded). If the Index has fallen by 10% or more, your investment continues.

If the plan does not produce a return, your initial capital is returned in full unless the Index has fallen by 50% or more, measured at the end of the plan term. If it has, your capital will be reduced by 1% for each 1% fall and so you could lose some or all of your initial investment.

Returns even if the FTSE falls up to 20%

Our next defensive plan is another kick out plan, the FTSE Defensive Kick Out from Focus, and will kick out and return your initial investment along with 7.15% for each year invested (not compounded) provided the FTSE 100 is at the required level at the end of each year, from year 2 onwards. The required level is 100% of its starting value at the end of year two, reducing by 5% in each of the following years down to 80% in the final year. So the FTSE could fall up to 20% and you would still receive 7%+ returns on your investment.

If the Index closes below the required level each year, no growth return will be paid and your initial capital will be returned in full unless the FTSE has fallen by more than 40% at the end of the term. If it has, your initial investment would be reduced by 1% for each 1% fall, and so you could lose some or all of your investment.

Returns even if the FTSE falls up to 50%

Our final defensive investment is the Investec FTSE 100 Defensive Growth Plan, which offers a fixed return of 34% at the end of the investment term provided the value of the FTSE is more than 50% of its value at the start of the plan (subject to averaging). Therefore, the FTSE can fall up to 50% and investors would still receive a 34% growth return, along with a full return of their original capital. The 34% return is equivalent to 5.0% compound annual growth.

If the Index has fallen by 50% or more at the end of the term, 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

Commenting on defensive investment plans, Oliver Roylance-Smith, head of savings and investments at Fair Investment Company said: “Despite the recent volatility in the FTSE the Index currently remains at historically high levels, but for those investors who are not confident that the market will rise in the medium term, knowing that you can achieve investment returns regardless of whether the market goes up, remains flat, or even falls slightly, could be an attractive opportunity.”

He continued: “Markets don’t like uncertainty, and so it is understandable that investors are going to consider, perhaps more than normal, the potential impact of leaving the EU on the FTSE in the medium term. Since the market can fall up to 40% before your initial investment is at risk, defensive plans also offer some capital protection against a falling market, and allow potential investors to consider the risk versus reward of the plan prior to investing, which could be appealing in the current investment climate.”

 

More information on the Investec FTSE 100 Defensive Kick Out Plan »

More information on the Focus FTSE Defensive Kick Out Plan »

More information on the Investec FTSE Defensive Growth Plan (ISA only) »

Click here to compare defensive 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 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 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 also 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.

60 second ISA savers guide to the 2016 Budget

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Following last month’s speech by the Chancellor, George Osbourne, we give our 60 second guide to the Budget for ISA savers, offering a quick round up of the main changes and what this will mean for both cash savers and investors alike.

Your ISA Allowance

While Chancellor George Osborne may have taken the decision to maintain the Individual Savings Account (ISA) Allowance at £15,240 for this new tax year (2016/17), the chancellor also announced that from 6th April 2017, it will see a significant increase of £4,760 giving savers and investors a total allowance of £20,000 to spread between their ISA accounts over the 2017/18 tax year. The Junior ISA limit will remain at its current rate of £4,080.

Innovative Finance ISA

The recent Budget also introduced a new type of ISA which has launched for this current tax year. Announced in the Summer Budget of 2015, this has fallen slightly under the radar for many but this new savings option, entitled the ‘Innovative Finance ISA’, is designed to provide a tax-free wrapper for investors in Peer-to-Peer Lending (P2P). This ISA allows individuals to lend to others by using Peer to Peer Lending platforms but without paying tax on the interest they earn.

As this is a new distinct category of ISA, savers can open an IFISA along with a Cash ISA and a Stocks and Shares ISA (or Investment ISA), all within the same tax year – so any contributions into this type of ISA does count towards the £15,240 current tax year allowance. Although at present there are only a small number of P2P providers who have been authorised to offer their products within an ISA, there are a significant number who are awaiting authorisation. The area of P2P lending has seen significant growth in recent years and there will be more to follow on this later in the year…

Lifetime ISA

Possibly one of the biggest headlines for this year’s budget was the announcement by Mr Osborne of another kind of ISA which will launch in April 2017 – the Lifetime ISA. The Lifetime ISA will allow individuals aged between 18 and 40 to simultaneously save for both the purchase of their first home and their retirement. The ISA will work similarly to the current Help to Buy ISA, in that savers will be granted a 25% bonus on their contributions when used to purchase all, or part, of a new home (up to a maximum property value of £450,000 nationwide), with a maximum annual contribution limit of £4,000.

However, savers will not be limited in how much they can contribute each month and in addition to this, money withdrawn after the account holder’s 60th birthday will also enjoy the same bonus and can be used for any means. Savers will be able to receive their bonus on contributions made up until their 50th birthday, leaving the possibility to make a maximum individual contribution of £128,000 which would be matched by the government to a value of £32,000. Partial withdrawals from the account for other uses before the age of 60 will be allowed but will not benefit from the bonus or any interest upon it and incur a 5% charge.

Help to Buy ISA

With much of its function being replicated with the new Lifetime ISA, it was also announced that Help to Buy ISAs will be made unavailable to new savers from the 30th November 2019. Savers who opened a Help to Buy ISA before this date will be able to keep saving into the account, but they must claim the bonus by 1st December 2030. However savers waiting for the Lifetime ISA to launch should be aware that it is possible to open a Help to Buy ISA and then merge it with a Lifetime ISA when it launches in April next year. It is also possible to have both a Help to Buy ISA and a Lifetime ISA but individuals will only be able to benefit from one of the bonus payments when used to purchase a property.

Helping savers plan for the future

All in all this was a good budget for ISA savers, but we must not also overlook the significant reforms which have taken place since the New ISA (NISA) was introduced in April 2014 and which remain unchanged, including:

  • Increased flexibility – savers can divide their ISA allowance between Cash ISA and Stocks and Shares ISAs in whatever proportion they wish, especially welcome news for those who want to use their entire ISA allowance for cash savings which had been previously capped.
  • Increased ISA transfer potential – savers can transfer from a Stocks and Shares ISA to a Cash ISA, or the other way around. Previously, transfers from Stocks and Shares ISAs to Cash ISA were not permitted.
  • Tax-free interest in Stocks and Shares ISAs – interest is now earned tax free in a Stocks and Shares ISA whereas previously, with the exception of a Cash ISA, any cash held within the Stocks and Shares element of an ISA was subject to a 20% charge on the interest earned – paid to HMRC.
  • Withdrawals permitted – since last year savers may now withdraw and replace money in the same tax year, without it counting towards their annual ISA allowance provided that it is paid back in to the account by the end of the financial year in which the withdrawal is made. Previously money taken out of an ISA lost its tax free status, meaning that additional payments would count towards your allowance for that year.
  • Junior ISA flexibility – those who have taken out a Child Trust Fund (CTF) for their child are now permitted to convert the fund into a Junior ISA.
  • Passing on an ISA allowance – married couples can 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.

Combined, these ISA reforms give savers every opportunity to plan for the future, regardless of their stage of life.

Fair Investment View

Commenting on the Budget, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited said: “Along with the changes made to existing rules surrounding ISAs in the last two years, the 2016 Budget’s announcement of several new types of Individual Savings Account means that individuals may now utilise their personal ISA allowance with far greater flexibility than ever before, spreading their allowance between a variety of savings and investment plans to meet their needs.”

He continued: “But perhaps the most significant move is the increase to a £20,000 ISA allowance in 2017. Remember that just 2 years ago, the allowance stood at just £11,880, with a boost from 1st July of that year to £15,000. This recent announcement sees the limit rise from £11,880 on 6th April 2014 to £20,000 on 6th April 2017, a rise of £8,120 in just 3 years. This means that a couple could save up to £30,480 during this current tax year, increasing to £40,000 from 6th April next year, offering the potential to accrue considerable sums within their ISA accounts in a relatively small timeframe. Good news indeed for savers.”

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

Click here for our Top 10 Investment ISA Plans »

Click here to compare our selection of Cash ISAs »

Click here to compare our selection of Investment ISAs »

Click here to compare our selection of Share Dealing and Self-select 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. 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 »

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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.