What are Investment ISAs?
Investment ISAs or Stocks and Shares ISAs offer you the opportunity to invest in the stock markets in a tax-efficient way, availing of a range of different investments managed by specialist advisers.
An investment ISA (or Individual Savings Account) is an umbrella that spreads your savings across a number of funds. Currently (2010/11) you can invest up to £10,200 each year in an investment ISA.
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Investment ISAs enjoy a special tax status which allows you the benefits of a stock market investment without paying income or capital gains tax. You do not need to declare your investment ISA savings on your tax return.
Investment ISAs have been around for 10 years, and now there are a large number of companies offering a wide range of funds investments through investment ISAs. These can range from higher-risk growth funds, to lower-risk tracker fund investments. It is therefore important to decide your risk level, in order to make informed choices about your investment ISA. Our expert advisers will be happy to help you establish your risk profile, in a short conversation to evaluate the level of risk you would prefer.
You can speak to an investment adviser on 0800 678 5929 or submit an online investment enquiry
Investment ISAs invest your money onward into funds with varying levels of management fees. It is important to be aware of the management fees of various funds before you invest, and again, our advisers have all the information you need at their fingertips.
Savers who wish to minimise costs in their investment ISA may prefer to invest in tracker or index funds, which follow the fluctuations of the stock market and generally have lower management fees than actively-managed growth funds. On the other hand, your investment in a tracker fund, as if follows the stock market index, will not grow at a higher rate than the index. The potential for strong growth in an investment ISA using index or tracker funds is generally considered to be lower than that of an actively-managed growth fund.
Why use investment ISAs as opposed to cash ISAs?
The reason for opting for investment ISAs is that, historically, stock market investments have tended to outperform cash investments when left to grow over at least 10 but preferably 15 years. You can therefore justifiably hope for a better return in the long term from an investment ISA than from a cash ISA, a bank account, or a building society account.
At times such as the present (2010) when the Bank of England’s base rate of interest is low, returns on savings are generally lacklustre in any case. As a result, those wishing to cash in on the tax advantages offered by ISAs are tending towards stock market investments. Recent research from Barclays Stockbrokers showed that 81% of savers intending to make use of ISAs during 2010 would be opting for investment ISAs.
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