Posts Tagged ‘cash isa’

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.

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.

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 »

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.

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.

Savings Head to Head: comparing fixed rate bonds and structured deposits

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Despite the prospect of interest rates rising in the next few years, many savers understand that even when this does eventually occur, there is no guarantee that this will result in higher savings rates being offered by the banks. Indeed, most of us would agree that the 5% plus returns of yester-year are well and truly behind us. This has led many to consider moving some of their savings into areas with the potential for higher returns. Investing is perhaps the most obvious choice however there is also a popular middle ground, which combines the potential upside of stock market linked returns but without risking your capital and maintaining the FSCS depositor protection so many savers look for – the structured deposit.

Since many of these savers are using money that historically would have been put into a fixed rate bond, so we take a deeper look at the rise in popularity of the structured deposit by comparing it with the more traditional fixed rate.

Fixed rates fail to hit the mark

We are all aware that past performance is no guide to future performance when it comes to reviewing a particular investment or how a stock market index has performed previously, but what are the main risks associated today with cash and savings rates?

In years past it would have been commonplace for savings accounts to offer the potential to beat what at the time would have been much higher levels of inflation, especially if you were prepared to tie yourself in for the medium to longer term. But today, the best fixed rates are offering little above 3% and this has been the case for some time. This is therefore a significant shift in the savings landscape.

Savings or investment?

This sets the scene for the rise in popularity of an alternative to fixed rates bonds – the structured deposit. This product similarly provides full capital protection and can also be used for ISA money, both New ISAs (NISAs) and ISA transfers, therefore placing it in the savings space as a potentially viable alternative to more traditional offerings.

There are a variety of structured deposits being offered in the market today. Although they can be considered as an alternative to fixed rate bonds, they also have characteristics that are similar to investments. The purpose of this comparison is to help you understand what structured deposits are by comparing them with the more traditional fixed rate products and what you should look out for before putting your hard earned money in such products.

What is a structured deposit?

A structured deposit is essentially a combination of a deposit and an investment product, where the return is dependent on the performance of an underlying investment. The underlying investment is normally either an Index, such as the FTSE 100 Index, or a smaller number of shares from within the Index.

UK structured deposits naturally lean towards the FTSE 100 Index as this is the most commonly quoted benchmark of investment performance and is the most familiar to investors in this country. If the deposit uses a smaller number of shares rather than the Index itself then these are normally shares listed within the FSTE 100 Index and often it is the larger shares available that are used.

How do structured deposits compare with fixed rate bonds?

Structured deposits have a few important characteristics that distinguish them from the more traditional savings accounts. With a fixed rate bond the returns and maturity periods are fixed while structured deposits on the other hand have variable returns, and in some cases, variable maturities as well.

Variable returns

Structured deposits generally provide the possibility of higher returns compared to fixed rate bonds. This has particularly been the case in recent years with continuing record low interest rates and historically low savings rates. However, you should balance this possibility of higher returns against the risk of variable returns. In some scenarios, you may get lower or no returns at all.

Fixed or variable maturities

Most structured deposits have fixed terms which are normally between three and six years in duration whilst some incorporate the ability for the deposit to be redeemed before the maturity date. A popular example of this is an autocall, more commonly known as a ‘kick out’ plan. Here, the plan will mature early or ‘kick out’ provided the underlying investment performs in a particular way, which will be known prior to investing since it will specified in the terms and conditions of the plan. The Investec Kick Out Deposit Plan for example will mature early if the value of the FTSE 100 Index at the end of years 3, 4 or 5 is higher (subject to averaging) than its value at the start of plan. If it is not higher on any of these dates, the plan will continue.

Early maturity

Where a structured deposit is designed in this way and early maturity does occur, you can expect to receive, as a minimum, the full value of your initial deposit. Depending on the circumstances, this early redemption feature may benefit you – for example, if you wish to use your money in other ways, you can get back your initial capital and any stated additional returns as soon as redemption occurs.

You may, however, be exposed to reinvestment risk, as you would with any fixed term savings product. This is the risk of having to re-invest your money in a low interest rate environment when interest rates fall. To counter this, structured deposits are usually re-issued every 4 to 6 weeks so there is normally the facility to reinvest either in the provider’s current version of your original plan, or if the exact plan is no longer available, a similar plan with your original provider or another in the market. Therefore, depending on market conditions and your specific income or growth needs, a structured deposit may or may not be a good investment to put your money in.

What happens if I need to withdraw my deposit before the maturity date?

Structured deposits, like fixed rate bonds, are meant to be held for the full term. Your initial deposit will be repaid in full only at maturity (or early maturity where relevant). If you withdraw your deposit before the maturity date, you may lose part of your return and/or your initial capital. The amount payable to you depends on the market value of the underlying investment that your structured deposit is linked to, which cannot be pre-determined. There is also therefore the possibility that the value could be higher than your original deposit. You should also bear in mind that structured deposits may be subject to periodic valuations which may not be on a daily basis, for example weekly. This means that you may not be able to withdraw your deposit immediately.

What should I consider before investing in a structured deposit?

Structured deposits come in different forms. You should consider whether a structured deposit fits with your financial goals, attitude to risk and your personal situation. When choosing a structured deposit, these are some of the factors to consider:

Liquidity

When might you need this money and do you have any additional funds available? Consider your liquidity needs as your money will be tied up for a period of time and early withdrawal may result in loss of part of your return and/or your initial deposit. Fixed rate bonds are also likely to have penalties for cashing in before the end of the fixed term which is normally linked to a period of interest (for example, six months). This amount could be higher or lower than the loss for early withdrawal from a structured deposit. As with any fixed term plan, it is therefore prudent to make sure that you have sufficient savings set aside before investing in structured deposits.

Risks

Determine whether you have the risk appetite for these products. Structured deposits are riskier than normal fixed deposits as there is a risk that the underlying investment does not perform in the manner required in which case you may not receive any returns at all. In this scenario you would have been better off with a fixed rate bond. You should understand the risks involved and what will happen in a worst-case scenario and if you are unsure, seek financial advice from a professional.

One of the major risks to consider for fixed rate bonds is that your money loses value in real terms should it fail to keep up with inflation. Although inflation is historically low at present, so too are he returns available on fixed rates. Therefore, although you have the peace of mind of a guaranteed return, this is not guaranteed to keep up with increases in the cost of living and so your initial deposit plus any interest could in the future be worth less in real terms.

Return

Since the returns from structured deposits are dependent on the performance of an underlying investment such as stock market indices or shares, you should understand how the performance of the investment affects the return on your deposit. Remember that past performance is not a guide to future performance.

Terms and Conditions

Read the terms and conditions and other documentation of the structured deposit carefully before making any commitment. If you do not understand how the product works, seek clarification. Do not buy anything you do not understand.

Structured deposits compared to fixed rate bonds

This table compares the main features of structured deposits and fixed rate bonds:

Features Structured Deposits Fixed rate bonds
Minimum deposit Structured deposits sometimes require a higher minimum investment amount (usually £3,000) but there are some providers who offer lower minimums of £500. The minimum amount for a fixed deposit is normally around £1,000 but note the recent trend for providers to offer tiered interest rates where the higher headline rates are only on offer for larger lump sums.
Fixed terms Structured deposits have maturity periods that vary from 3 years to 6 years. Fixed rate bonds normally have maturities ranging from 9 months to 5 years although there are some who offer shorter terms.
Early maturity Some structured deposits incorporate the potential to mature early each year, currently from as early as year 3 onwards. In this situation, you will normally receive a return of your initial deposit along with any stated returns. Fixed rate bonds do not normally have the ability to mature early.
Initial deposit Your initial deposit will be repaid in full: (i) At maturity; or (ii) If the bank redeems it before maturity. This will apply only if your structured deposit includes an option that enables the bank to redeem or “call” the deposit before the maturity date for reasons specified in the terms and conditions – this is normally dependent on the performance of the underlying investment. Your initial deposit will be repaid in full at maturity.
Early withdrawal by the depositor If you withdraw your deposit before the maturity date, you may lose part of your return and/or initial deposit. The amount that you will be paid depends on the market value of the underlying financial instrument that your structured deposit is tied to, which cannot be pre-determined. You should also bear in mind that structured deposits may be subject to periodic valuation, which may not be on a daily basis. This means that you may not be able to withdraw your deposit immediately. Check the terms and conditions for early withdrawal of the deposit with your bank. If you withdraw your fixed deposit before maturity, the bank may levy certain charges. In most cases, your bank would have taken a corresponding commitment on your deposit with a counterparty.When you withdraw your deposit early, your bank may have to levy charges to cover the cost of its own commitment. Check the terms and conditions for early withdrawal of the deposit with your bank.
Risks involved Structured deposits are generally less risky than investing directly in the underlying investment since the bank is obliged to repay the principal in full at maturity or when it redeems the deposit before the maturity date.However, they are riskier than traditional fixed rate deposits because their returns are dependent on the performance of the underlying investment. In some scenarios, you may get no returns at all and only get back your initial deposit. Where a structured deposit is callable, you may be exposed to reinvestment risk. This is the risk of having to invest your money in a low interest rate environment when interest rates fall. Structured deposits have maturity periods that vary from 3 to 6 years and are designed to be held for the full term which means that you may not be able to use your money for other purposes before maturity, for example, investing your funds in a fixed rate bond or an alternative savings plan offering higher interest rates when interest rates rise. Structured deposits are exposed to the credit risk of the deposit-taking institution (for example, a bank). This is the risk that the deposit-taker will be unable to fulfill its obligation to pay you even your initial deposit should it fail and become insolvent. However, in this situation it is likely that you would be eligible to claim under the Financial Services Compensation Scheme, depending on your individual circumstances. Fixed rate bonds are considered low-risk as the interest payable is known at the outset and your initial deposit is fully capital protected. Fixed rate bonds are similarly exposed to the credit risk of the deposit-taking institution being unable to fulfill its obligation to pay you the deposited sum. However, in this situation it is likely that you would eligible to claim under the Financial Service Compensation Scheme.The impact inflation can have on your overall return is an important risk to be aware of since if the rate of return you commit to is lower or become lower than inflation during the fixed term, the purchasing power of your capital will be eroded and you may be unable to surrender without incurring penalties.
Financial Services Compensation Scheme Structured deposits are covered by the Financial Services Compensation Scheme which covers deposit claims up to a maximum of £85,000 per person, per institution, subject to your individual circumstances. Fixed rate bonds are also covered by the Financial Services Compensation Scheme up to £85,000 per person, per institution.
Returns Structured deposits generally offer the possibility of higher returns compared to fixed rate bonds of similar duration. This is in line with the higher risks you have to bear since the return on a structured deposit is dependent on the performance of the underlying investment (such as stock market indices or shares) to which it is linked – if this does not perform as required, you may not get a return. Returns on fixed rate bonds are typically lower as they are less risky than structured deposits. This is because the deposit is fully capital protected and the rate of interest paid is fixed at outset and guaranteed to be paid provided you do not withdraw your money early and the provider does not become insolvent.

The final analysis

Fixed rate bonds pay a fixed rate of interest at predetermined times throughout the fixed term, so you know exactly what you will receive and when you will receive it, giving you certainty of interest and the peace of mind which this entails. Unfortunately times have changed. One of the main reasons for the increase in popularity of structured deposits has been the over-reliance of fixed rate bonds by savers who are now seeing the real value of their savings eroded at a time when they need it most.

Structured products combine capital protection with the potential to receive higher rates than available from fixed rate bonds. Since there is the potential to achieve only a return of initial capital, structured deposits are not however designed to meet the needs of every saver nor, perhaps, to receive your entire savings. Ultimately, which option or blend of options will depend entirely on your individual circumstances.

Weighing up all of the options

These are difficult times to say the least and in recent years it is the saver who has perhaps suffered more than anyone else. Record low savings rates continue, low wage increases have affected both private sector and public sector employees alike. Understanding the impact of low rates, especially over time, and giving full consideration to all of the options available, particularly using your ISA allowance, are all good reasons to compare traditional savings accounts with alternatives such as structured deposits.

There is a wide variety of structured deposits being offered in the market and as market conditions allow, these are constantly being updated with new versions of previous issues as well as completely new plans. We at Fair Investment Company aim to provide you with a continuous selection of the best the market has to offer so keep coming back to visit us.

 

Click here to compare alternatives to fixed rate bonds »

 

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.

Some of the plans referred to in this article are structured deposit plans that are 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 investment 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 investment if the plan is not held for the full term. The past performance of the FTSE 100 Index and any of it shares is not a guide to its future performance.

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.

5 good reasons to use your ISA allowance

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With the end of the tax year less than a month away, making sure you use your ISA allowance to take advantage of one of the UK’s most popular tax shelters should be a top priority. But if you are wondering why you need to consider your ISA options or what all the fuss is about, we offer you 5 good reasons to use you ISA allowance.

1 – The allowance has never been higher…

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 – 6th April to the following 5th April. This is known as the ISA allowance. This year’s allowance is £15,000, which is the highest it has ever been, and after 5th April 2015 it will rise further still, to £15,240. Because many ISA providers are open to ISA applications for this tax year and the coming tax year, this means that each individual could potentially put away £30,240, tax-free, this ISA season. That’s £60,480 per couple.

2 – …Or more flexible

In previous years, you could only hold up to half the annual ISA allowance in a Cash ISA and the rest had to be put into Stocks & Shares ISA. This year, the way in which ISAs work changed – there’s now no restriction on how you use your allowance, as you can use the full amount for a Cash ISA, an Investment ISA, or a mixture of the two in any proportion you wish.

3 – Shelter your money from the tax man – you don’t pay tax on any income or growth

Any interest received or capital gains made are not then subject to tax, whether held in a Cash ISA or an Investment ISA, and there’s no need to declare it on your tax return. If you’re a higher rate taxpayer this means that you get to keep hold of 40% more of the interest on your hard-earned cash than you would in a non-ISA savings account. Based on £10,000 receiving a 5% annual return, this is the difference between receiving £500 within an ISA or £300 outside of an ISA (or £500 versus £400 for a basic rate taxpayer). Why let the tax man take away money that you could otherwise keep?

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2015 Cash and Investment ISA selections

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With time running out to meet the 5th April end of tax year deadline, we bring you our selection of some of the best Cash and Investment ISAs available. We also include some alternative options for those who are seeking the potential for a higher return while still protecting their money, as well as our best-selling fixed income investment, for those considering investing their existing ISAs or new ISA allowance.

New ISA Rules – Save up to £15,000 in your cash ISA

As a result of new ISA rules which came into effect on 1st July 2014, your ISA allowance for the current 2014/15 tax year is £15,000. You can put some or all of this allowance into an Investment ISA, or some or all of the allowance into a Cash ISA. Bear in mind that that these allowances are per person, so a couple can put up to £30,000 in total into a cash ISA before the end of the tax year. Make sure you remember the most important end of tax year deadline which is midnight on 5th April. Note that many ISA providers will need your application – and possibly your cleared funds – before this date and that some ISA plans have an earlier deadline for ISA transfers.

2015 Cash ISA selections

Instant access Cash ISA selection

If you want to be able to access your money in an instant, the NatWest Instant Access Cash ISA offers a rate of 1.00% (variable) on balances of over £25,000, and a rate of 0.50% (variable) on balances below £25,000. Interest is paid monthly, and transfers in are permitted, meaning that if you transfer in cash from previous years’ ISA you may well be eligible for the higher 1.00% rate as your total amount held may be greater than £25,000. The account is easy to manage in branch, by phone and online, and is open to UK residents aged 16 and over.

Click here to compare other instant access cash ISA options »

Medium term Cash ISA selection

For those looking for a medium-term ISA option, the Aldermore 3 Year Fixed Rate Cash ISA offers a return of 2.20% (gross) with a minimum deposit of £1,000. Interest is calculated daily and can be paid either monthly or annually. Transfers from other ISA providers are available, and the account can be managed by phone, by post or online. You can withdraw cash early if you need to, but be aware that to do so means that you will be subject to loss of interest.

Click here to compare other medium term fixed rate Cash ISA options »
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