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ISA Time Again

ISA Building Blocks

The current financial year comes to an end on April 5th and so if you have not yet topped up your ISA (Individual Savings Account) then now is the time to do it.  You can save up to £10,200 this year, completely tax-free.  It is therefore surprising that people capable of saving this amount fail to take advantage of the scheme.

Admittedly only half of the total amount (£5,100) can be saved in cash and it may be that some individuals are nervous about other forms of ISA investments, but it really is worth talking to an independent financial adviser (IFA) or even your own bank, to see what's available.

The 'big offer' sales pitch is now underway with banks like Santander leading the charge with an interest rate of 3.3%.  The Halifax is not far behind with an offer of 3.2% and others will be trying to attract your savings with similar offers.  Some of these offers are aimed at existing customers only, but others are open to new account holders so it's worth shopping around.

A basic rate tax payer with an ISA paying 3% would have to have a conventional savings account paying 3.75% to get the same return.  A higher rate tax payer would need to earn 5%.  Conventional savings accounts paying that level of interest don't exist, the very best paying a tiny bit more than 2.9%.

With inflation running at twice the Bank of England's 2% target we all need to make sure that we are getting the best possible return on our savings.  Even with an effective taxable interest rate of 3.75% our savings are still below the rate of inflation and we are therefore going backwards in terms of spending power.  Make sure that you go backwards as slowly as possible by taking the maximum possible advantage of an ISA account.  You have to have this in place by April 5th.

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