Taking Advantage Of ISA Savings

The launch of ISA in 1999 has brought consumers in the UK a favourable method of savings and investment. In contrast to the old structure of UK saving scheme (PEP and TESSA), the idea of introducing ISAs was to encourage the low, middle and high class consumers to deposit money on banks where the economy and the saver can both benefit. An Individual Savings Account allows savers to let their money grow without being deducted by taxes.

Depending on the provider, ISA interest rates differ from the very low to the high. Cash access also vary since some ISAs have a certain notice periods and fixed terms where you can’t take out your money until the term ends whereas some ISA polices allow savers to easily access their money.

Cash ISAs and Stocks and Shares ISAs are the two basic forms of ISA savings. A person should be 16 years of age in order to open a Cash ISA while opening a Stocks and Shares ISA will call for individuals to be 18 at least 18 years old. Also, for individuals who were born before April 5 1960, a sum of £10,200 is their ISA allowance annually and for individuals who are born after April 5 1960 has an ISA allowance of £7,200 but these sums is supposed to be raised to £10,200 by April 6 2010.

What’s with the April 5 and 6 you ask? It’s because April 5 and 6 are the end and start points of the tax year, in that order. Furthermore, be sure to use your ISAs allowance within the tax year or else you will lose it by April 6 which is the commencement of a new tax year.

Since the credit crunch, the base rate of the Bank of England has dropped to just 0.5% per year. So ISA shopping is one of the best move you can make so you can choose an ISA rate that is much higher. Sadly, the slow economic recovery is further dragging down ISA interest rates to as low as 0.1% per year. To have a clearer picture of how low this rate is, multiply an amount by .001. Currently, the highest interest rate you can acquire on an ISA is a maximum of 2.75%.

Other ISA arrangements can even offer higher yearly rates of more than 3%. An ISA with a fixed term of 5 or more years can grant as much as 4.6% annually and this type of ISA is similar to what is identified as time deposits. You should conscientiously think before making a hefty deposit to this kind of ISA because you won’t be able to have access to it within the term.

If you already have an ISA account, you can also opt for a balance transfer to a different provider that presents a higher rate. But you should not pull out your ISA funds and close the account because that is not how it works. What you need to do is let your present bank transfer the account to the new one.

In order to avoid the long lines of opening an ISA account, don’t wait to open an ISA account before the tax year ends. Between March to the first week of April, it has been proven that more people open ISA accounts than other time of the year. If you open an ISA in a much earlier date, you can avoid the rush and you will also earn your interest rate much sooner.

Be Sociable, Share!

•