Is it time to give ISAs another look? - Savings - News - Moneyfacts


Is it time to give ISAs another look?

Is it time to give ISAs another look?

Category: Savings

Updated: 04/08/2010
First Published: 03/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Even for those who didn't decide to take one, few people could have failed to notice the interest (no pun intended!) demanded by ISA accounts this year.

In fact, in 2010 thus far, some £3.1 billion has been invested into ISAs in the UK, figures from the Investment Management Association revealed this week.

It is the highest amount recorded for the first six months of a year since way back in 2001.

Additionally, June 2010 saw net ISA sales race to £434 million, the highest for the months since the dawn of the new millennium in 2000.

It's not hard to see why. The savings environment is particularly unforgiving at the moment, as the masses battle against the combined forces of high inflation and low interest rates.

Certain benefits have been cut, while other taxes have also gone up or are set to increase as a result of the coalition Government's emergency Budget.

The most noticeable of these will likely be the hike in VAT that comes into effect from 4 January 2011. With consumers seeing the tax added to almost everything they buy jumping from 17.5% to 20%, it is important that our savings go as far as possible.

One way to ensure this is to look round for an ISA paying a decent rate of interest.

You may wish to consider a stocks and shares ISA, which links your returns to the performance of equities, although this is probably best for more experienced investors.

The simplest option is probably a cash ISA, which allows savers to deposit a maximum of £5,100 per annum from April. Don't worry if you haven't yet used this year's allowance, there's still plenty of time.

There are plenty of cash ISAs from a number of providers currently available, with their tax free status making them an ever popular choice.

Amongst them is Nationwide BS's e-ISA that offers a rate of 2.75% p.a. (2.67% AER) on a minimum investment of just £1. This account may suit you if you need access to your money as withdrawals are allowed. (In order to apply for and operate an e-ISA you must have a Nationwide card account)

It also allows transfers in, so if your current ISA is paying a shabby rate, then you can move over your current nest egg.

For instant access from just £1, Barclays Bank also offers a Golden ISA (Issue 2) rate of 2.08%.

If you would like to open a fresh new ISA, then Northern Rock's ISA Breaker Issue 2 might be worth a look. Offering a rate of 3.00% on a minimum investment of £500, this account would be suitable for somebody looking for a secure home for their money, as withdrawals are subject to 60 days loss of interest.

However, after a year, you'll have built up a nice sum of interest.

The beauty of the ISA – apart from keeping the taxman at bay – is that you can keep carrying your balance over each year, meaning your savings and, therefore, interest, increases.

To make sure your money is earning as much as it possibly can, always keep an eye on the end dates of the ISA you choose, as well as other terms and conditions.

These include introductory bonuses, which often last for just a year or 18 months.

By consistently reviewing your ISA, you can make sure your money is always earning a competitive rate of interest.

Check the Best Buy tables now to find the ISA to suit you.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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