ISA silly season (make the most of your money).

[shish, chop.. halloumi.]

With interest rates on bank and building society deposits so low, most savings accounts (cash) aren’t even keeping up with inflation, let alone making you any money. As inflation grows, and as your savings make you nexrt to nothing, your money is losing value. But there is still one investment that continues to offer opportunities for growth, and that everyone can address simply and quickly. The Individual Savings Account (ISA) remains one of the most tax-efficient methods of investing, and as you may be aware, you can put up to £10,200 into a stocks and shares ISA in the current tax year. But if your full ISA allowance is not used before the end of the tax year, a valuable opportunity for tax-efficient investment is lost for good, whether its in a cash ISA (£5100 max), an Investment (Stocks and Shares) ISA or a mixture (up to £10,200).
　
A Daily Telegraph article (3 Feb 2011) reported that "The FTSE100 has risen by 13.57% over the past year, helping alternative sources of investment, such as stock markets, become more attractive than many conventional savings products." Not surprisingly then, sales of ISAs in the current tax year have already hit their highest level since 2001. No-one can predict future stock market performance and you could lose money as your funds are being invested in funds which match your capacity, appetite and threshold for risk, but go and see a local IFA to ensure (that if you do want to get invested before 5 April) the choice of funds in your ISA matches your expectations and your attitude to that level of risk as closely as possible. And that it continues to do so in future as the economic environment changes.

Most IFAs want you to take full advantage of the increased £10,680 ISA allowance in the 2011/12 tax year too, and you should be able to apply in advance. All it takes is a post-dated cheque. Remember, the sooner you invest, the longer your money has for any potential growth. If anyone has any questions about ISAs, please don't hesitate to ask (I'm happy to offer information if anyone is baffled by it all). I have spent the office doing end of year ISA paperwork in the office, and in particular, a rather spicy basket of funds based largely, on emerging Asian markets. Not for everyone of course (please make sure you take properly authorised and regulated advice), and its now time for a pint and a stroll along Rutland Water..

http://www.moneymadeclear.org.uk/products/investments/types/tax_wrappers/investment_ISAs.html

 

[shish, chop.. halloumi.]

Every year at around this time, if the High Street in Oakham is similar to yours, you’ll be getting bombarded with ads urging you to use up your ISA allowance before it runs out at the end of the tax year on 5 April.

But what does this mean, and what is an ISA?

An ISA (Individual Savings Account) is not a product. It is simply a wrapper that you protect savings with, in order to allow you a tax-free savings account designed to give you 100% of the interest you earn on your investment which would normally be partially whittled away by George Osborne.

Normally, basic rate tax payers (SACs/Cpls/some SNCOs etc) usually lose 20% of the interest they make on their savings, while higher rate tax payers (most Flt Lts/ CTs etc) lose 40%. But if you save your money in a tax-free ISA, it will act as a ‘protective wrapper’ preventing that nice Mr Osborne from claiming a chunk of your interest.

What types of ISAs are there?

There are two main types of ISAs; a cash ISA and a stocks and shares (or investment) ISA.

Cash ISAs work in the same way normal savings accounts do, but without your interest being pinched by the taxman. You choose if you want a fixed rate account, an easy access (or instant access) account or a regular savings account. The only difference is that you don’t pay tax on the interest you earn.

By contrast, with a stocks and shares ISA you can invest in individual stocks and shares or investment funds. Any profit you make will not be subject to capital gains tax - another nice tax break. However everyone, both basic rate and higher rate taxpayers, is expected to pay the usual 10% tax on dividend earnings.

Who can save in an ISA?

If you joined up young, you’re catered for, because anyone who is 16 or over and a UK resident can save money in a tax-free cash ISA, although to save in a stocks and shares ISA you need to be at least 18. There is talk of Junior ISAs being opened to younger investors which will allow them access to ‘real’ investments too.

How much can I invest?

As of April 2010, the ISA limit increased for everyone to £10,200 per tax year. Of this, the maximum amount you can put into a cash ISA is £5,100, and then the remainder must go into a stocks and shares ISA. On the other hand, you could choose to place the whole £10,200 into a stocks and shares ISA.

When should I invest?

As long as you have not exceeded the £10,200 ISA limit you can invest in an ISA at any point during the year. However, around the end of every tax year is known as ‘ISA season’. This is the time when people are encouraged to use up their remaining ISA allowance and pick what ISA they want for the next tax year.

Investing early in the tax year is important because the longer your money accrues interest, the more money you will make.

How many ISAs can I invest in?

You can only invest in one cash ISA and one stocks and shares ISA each year. However, you can invest in different ISAs in different years, and there is no limit as to how many ISAs you invest in over time.

Can I withdraw my money?

Yes you can. However, how easy it is to make withdrawals depends on the type of ISA you have invested in. While with an easy access account you can withdraw your money whenever you want, some fixed rate ISAs require you to give your provider notice before you make a withdrawal. And with others you might lose some interest or your bonus if you take your money out early. If you do want to withdraw money from your ISA it is important to understand that if you later decide you want to reinvest it, it will count against your annual ISA allowance.

For example, say you invest £5,100 in a cash ISA and then later withdraw £2,000. If you decide you want to reinvest your £2,000 later in the same tax year, you will not be able to as you have already invested your yearly limit and will therefore have to wait until the next tax year.

Can I transfer my savings?

You can move money from a cash ISA into either another cash ISA or stocks and shares ISA, but you can only transfer money from a stocks and shares ISA into another stocks and shares ISA. You can also choose to split the money in ISAs from previous years between different providers. But the money you have saved in the current tax year must be moved as a whole.

However, it is important to remember you should never try to transfer your money by simply closing your account yourself. If you do you risk losing your tax benefits as there is a limit to how much you can save each year (see ‘can I withdraw my money’ above). Instead, always ask your new provider to arrange the transfer for you. But be aware that not all ISAs accept transfers.

Will my savings be safe?

As of this year, under the Financial Services Compensation Scheme (FSCS) deposits up to £85,000 and investments up to £50,000 per individual per institution are protected. This means that if you save £100,000 in one single financial institution and the bank collapses, you are only guaranteed to get some of your money back. If you split your £100,000 between two separate organisations however, all of your money will be protected. Be aware that many of the high street’s biggest banks share the same Financial Services Authority (FSA) registration and therefore count as a single financial institution - HSBC and First Direct for example. This means under FSCS rules only £85,000 of your money in both banks combined will be protected.

How do I pick an ISA?

If you want to invest your money in a stocks and shares ISA, you need to take advice. If you trust your bank, fine.. failing that, see an Independent Financial Adviser.

As for cash ISAs, there is a wide selection of ISAs available from most banks and building societies, and even some supermarkets and retailers. To help ensure you earn a competitive interest rate on your savings it is a good idea to use price comparison websites to help you shop around and compare accounts.

Bear in mind though, that with inflation running at almost 5% at the moment, and ISA interest rates returning far less, even though your savings will be tax free, they will still be losing you money in real terms. Take advice on how much you need in ‘cash’ and why, and what you should be doing in order to invest for your future, and how. I hope thats of help.

 

[icarus]

The silly season it most definitely is, according to creditable sources two chief European Central Bank economists have resigned in the last six months citing conflictions on how to most effectively deal with the troubled Eurozone. All this along with the FTSE/Dow Jones/DAC and Nikkei moving around in big numbers makes interesting times for all those that hold shares/equities and bonds (funds) in or outside of an ISA. Indecisive action by our European financiers over nation’s debt crises alongside US congress mind games on their debt ceiling has not added to the confidence of markets or established world economies. There certainly are some interesting times ahead as our leaders endeavour to agree on a cohesive plan to overcome financial stimulus to get economies moving in a positive direction.

 

[Kipper Fleet Bloke]

　
A Daily Telegraph article (3 Feb 2011) reported that "The FTSE100 has risen by 13.57% over the past year, helping alternative sources of investment, such as stock markets, become more attractive than many conventional savings products."

Arrrrrrrr that would be after going down by 25% the previous year would it?
Making you a net LOSS over two years of 11.43% ( Not real figures - just trying to put some perspective on it)

Don't forget mateys Financial Advisors have to earn a living like the rest of us and as far as I remember, they get hefty up front comissions on whatever you invest in - taken of course from YOUR money.
Don't get me wrong, I'm not saying shish, chop..halloumi is a crook. But it looks to me like an advert.
So you know - I've got Stocks and Shares ISA's myself but try to look on them as a medium to long term deal, where historically, they have risen in value. That, however, is no guarantee that the current mess in the world financial markets means that they will be up when you want to cash them in. Timing is everything here and stocks and shares ISA's may not be the product for you if you need access to your money and are risk averse. Think of the old 'eggs in baskets'.
If you haven't got that much money to put away you need to think seriously about it. Make sure you get MORE THAN ONE set of advice before commiting any money.
Also think MIS-SOLD ENDOWMENT POLICIES - why were they mis-sold?
Because the people selling them earned themselves big commisions on every one sold - Sound like the re-selling of Sub prime mortgage and other toxic debt that kicked all this financial turmoil off????
You decide.

 

[fileeth]

In a broad west country accent:-

Mostly this year i will be stuffing all my money under my matress and sleeping a bit more comfortably!!!..(ish!)

 

[icarus]

I hope it's less than £500 dude, I believe that's the default amount most insurance policies insure for reserves of cash in the home.

 

[needsabiggerfuse]

The stock market is a LONG-TERM investment, i.e. 10 years or more. If you invest expecting to make a quick buck, then you'd be better off going to a casino and putting your money on whatever takes your fancy. The old adage, for those with b@lls of steel, is 'Invest at the time of deepest depression'. The trick is to spot just when the market arrives at that point. DT_Xtremez_30:

View attachment 11412

 

[icarus]

Hi Fusey, agreed investing into equity markets is a long term strategy for those with a little bit of spare funds after the mortgage and bills have been taken care off. It's a move which I'm glad I took almost twenty years ago whilst I was at St Athan, by means of a PEP as they were called at the time. Don't know how I fell into it but ended up investing with Invesco Perpetual 'Equity Income Fund' which has managed to average over 10.2% tax free annually in that timescale despite growing through numerous financial crises. Another fund which has done me great service over the last decade is the Aberdeen 'Emerging Markets' fund which has annualised 19% through all its difficulties. But as you say timing markets at their lowest is something even the city analyst can always get correct, I've mostly ever drip feed monthly into my ISA stocks and shares investments although I must admit to the occasional gamble with a bigger sum if I'm feeling flush. FSA's and articles in publications such as the Investors Chronicle will probably highlight that now is a good a time as any to enter the frame, especially into Far Eastern and Emerging Markets equity Income, some are also saying wait a little longer as there may be further drops around the corner...

 

[Rocket_Ronster]

A wise man would tie £10,000 away on a 5yr deal, at 5% for £100 a month interest less tax if available

A wise man would indeed tie up £10k for 5yrs if he were to get £6k interest. DT_Xtremez_42:


(£100 a month X 12 months X 5yrs = £6000)

 

[needsabiggerfuse]

A wise man would indeed tie up £10k for 5yrs if he were to get £6k interest. DT_Xtremez_42:


(£100 a month X 12 months X 5yrs = £6000)

Ha! Beat me to it. The first wise man would be lucky to clear £40/month on his £10k @ 5%.

 

[Craig855s]

I have a stocks and shares self select ISA. and own shares in Vodafone who are paying a 7% dividend in Feb 2012 (and regularly pay 3%+ pividends twice yearly (aug and feb)

10k in vodafone over 10 years could well become 16k if not more

 

[needsabiggerfuse]

A reasonable estimate for 'How Long to Double My Money' can be obtained by using the 'Rule of 72', e.g. Interest rate 5% gives 72/5 or approximately 14.4 years.

On the other hand you may want to find what interest rate will more or less double your money in say 10 years. In this case, simply divide 72 by the time scale, e.g. 72/10 = 7.2%

There is no account of the intervening inflation rate in these calculations and if you use large interest rates (15%+) you'll get dud answers.

 

[Rocket_Ronster]

A good job i dont work in admin, though ive edited the post now. Should of been £50, instead of £100. Maybe i had £20k on my mind at the time.

Though, i had a look at the £10,000 in an AA 5 yr fixed rate at 4.60%, and then the best ISA (Transfer) which was Northern Rock at 3.05% which after 5yrs, the difference after tax on the fixed rate, was not as much as expected.

On the contrary, i`d say you`d passed the practical exam for admin, you just need to work on denying you`re in the wrong for much longer. DT_Xtremez_30:

 

[shish, chop.. halloumi.]

Hi Fusey, agreed investing into equity markets is a long term strategy for those with a little bit of spare funds after the mortgage and bills have been taken care off. It's a move which I'm glad I took almost twenty years ago whilst I was at St Athan, by means of a PEP as they were called at the time. Don't know how I fell into it but ended up investing with Invesco Perpetual 'Equity Income Fund' which has managed to average over 10.2% tax free annually in that timescale despite growing through numerous financial crises. Another fund which has done me great service over the last decade is the Aberdeen 'Emerging Markets' fund which has annualised 19% through all its difficulties. But as you say timing markets at their lowest is something even the city analyst can always get correct, I've mostly ever drip feed monthly into my ISA stocks and shares investments although I must admit to the occasional gamble with a bigger sum if I'm feeling flush. FSA's and articles in publications such as the Investors Chronicle will probably highlight that now is a good a time as any to enter the frame, especially into Far Eastern and Emerging Markets equity Income, some are also saying wait a little longer as there may be further drops around the corner...

In the main, timing the markets is for mugs; its all about endless research and knowing your stuff, and then staying on top of it. Many investors are driven purely by two emotions; fear and greed. Most clients disinvested from equity based stuff in July, parked in cash and re-entered the market 10 days ago at a 10% rebate.

The Aberdeen fund is labelled 'emerging', but if you have a really long term view, the BRIC funds, which are now 'established' are not as 'emerging' as CIVETS (Cambodia, Vietnam etc). There are going to be some decent UK smaller companies funds launched soon. Keep your eyes open for them and make an informed decision. More bigger UK companies are placing business with UK companies (beneficial exchange rates etc) and many UK small companies are in a great position because 3 years ago, they survived through good management and not through lending (because banks wouldn't support them).

In anticipation of more volatility, buy investments that you can liquidate at the drop of a hat.

 

[Obi Wan]

In the main, timing the markets is for mugs; its all about endless research and knowing your stuff, and then staying on top of it. Many investors are driven purely by two emotions; fear and greed. Most clients disinvested from equity based stuff in July, parked in cash and re-entered the market 10 days ago at a 10% rebate.

The Aberdeen fund is labelled 'emerging', but if you have a really long term view, the BRIC funds, which are now 'established' are not as 'emerging' as CIVETS (Cambodia, Vietnam etc). There are going to be some decent UK smaller companies funds launched soon. Keep your eyes open for them and make an informed decision. More bigger UK companies are placing business with UK companies (beneficial exchange rates etc) and many UK small companies are in a great position because 3 years ago, they survived through good management and not through lending (because banks wouldn't support them).

In anticipation of more volatility, buy investments that you can liquidate at the drop of a hat.

That would be Premium Bonds then.......money back in 7 working days if you need it and a chance to win 1 million smackers (other prizes are available) DT_Xtremez_14:

 

[shish, chop.. halloumi.]

Premium Bonds are a weird one. Yes, they offer capital preservation (so do other products), but what they don't do is allow you to capitalise on market growth. Sure, you could win the big one, but thats a gamble and level of risk that is far in excess of practically every other fund profile out there :-D ! With inflation running at over 5% (although it won't always be that high), your money is being eroded in real terms. 7 days access to funds isn't really relevent because you are not exposed to market sentiment; I was thinking more of not investing too much in certain funds, property, for instance.

What they don't allow you to do, is engage in goal-focused planning. No one in their right mind would plan for the future on the basis they might win a sum big enough with their Premium Bonds to buy a house or put the kids through Uni - if you know where you want to be in 5/10/20 years then everything you do now should be geared towards achieving that objective, and if that means investing in low risk vanilla funds even though you might have a huge capacity for risk, then so be it. I'm not suggesting thats what you are doing, but I speak with many risk averse people who (in my opinion, completely wrongly) think that Premium Bonds are the only/best way forward.

Work backwards; know why you're investing, what you have to achieve and then ask if what you are doing now is best placed to achieve that - a good analagy is HERRICK/TELIC ETC. We piled troops into the place dead quick but that was the easy part. The difficult part is making sure you have the mission, the objective and the exit strategies clearly nailed before you put the first pair of boots on the first C-130, because then, everything you do out on the ground has properly definable parameters, and as in the real world, the closer you get to going home, the less inclined you might be to taking needless risk!

The same is true for 'pure' financial planning - anyone can plonk money into products and places because they look good - the thing is, are they good for what you want to achieve, and in keeping with your time appreciation/scale?

 

[Inevertouchedit]

Anyone fancy 7% ???

I help run a Factoring Company (Stock Market Listed, so very, very secure), we borrow from investors and pay 7% APR (in a monthly cheque should you wish), we then Factor it out to Blue-chips at 12.5%

Simples......

pm me for details.

 

[icarus]

QE being tapered at last

QE being tapered at last

Reports on the Beeb that the US Fed have announced that they are scaling back on their bond buying stimulus programme by $10bn a month. Things beginning to look up at last with strong job growth for the worlds largest economy.