If you are looking to open an individual savings account in England, you may know it offers a variety of benefits. An ISA refers to a financial product offered to UK residents and designed for savings and investment purposes. One benefit is the account’s favorable tax status. Account holders contribute money from their after tax income, and this money is not subjected to capital gains or income tax upon withdrawal or within a holding. Another benefit is that a large range of investment types can be held in the account, and there is no restriction regarding how much and when you can withdraw money from the account. A third benefit is that you can use the money as a form of security when applying for a loan. Moreover, while the individual savings account is not a pension product, it can serve to complement your retirement income.
There are certain limitations as well. For example, newly paid in or subscribed money are to be held in one stocks and shares ISA and one cash ISA. This applies only to money that has been paid in within the current tax year.
Still, there are plenty of benefits of having an individual savings account. For instance, even if you are no longer a tax payer and have moved abroad, you can keep your existing account. The only restriction is that you will not be allowed to pay money into the account. Apart from this, you can invest in your ISA every time during the tax year, which starts on 6 April and ends on 5 April. You may be allowed to invest in the form of regular monthly amounts but not over the subscription limit or as a lump sum.
Another benefit is that normally, you will not be charged to open a cash ISA, with the provider setting the interest rate so that the costs are covered. However, if you prefer to open a stocks and shares account, the provider will typically charge an annual management fee and a setup fee.
Those who are looking to open an individual savings account should not only consider the costs involved. Risk is another consideration. A major benefit of the cash ISA is that it carries minimal risk, while cautious managed funds are better suited for persons who can take some risk. High risk investors may consider special equity funds.
Regarding the amount you can invest, the investment allowance for 2011 is £10,680. A portion of this amount or £5,340, you can save in cash, and the rest you may invest in a stocks and shares account. You have the option to invest with a different provider or stay with your current one for both types. In case you do not have a cash ISA, the whole amount of £10,680 may go into a stocks and shares ISA. Finally, note that some accounts do not exist any longer, among which the maxi and mini savings accounts.