I say I say ISA !

With the tax year coming to an end now is a great time to invest in an ISA. People always assume that everyone knows what an ISA is and the benefits of it, but do they and if so are they making the right decision?

There are two types of tax free ISA'S. Cash ISA's are basically ordinary savings accounts, but the interest you accumulate is free from tax. For the 2010/11 tax year you can save up to £5,100 with generous bonus interest rates which are tax free. Then there is a stocks and share ISA where the aim is to pick funds, and/or individual shares and bonds that are likely to deliver high returns for the lowest risk - but that also carry low charges. For the 2010/11 tax year, once you are aged 18 and over, you may invest up to £10,200 into your stocks and shares Isa

However whilst the interest rates seem attractive and the tax free aspect also is a big selling point must investors don’t realise that they could be missing out by not regularly switching their ISA.


The majority of ISA savers are missing out as a result of not switching their savings to accounts that offer higher rates, a consumer organisation has claimed.

According to Consumer Focus, as many as two-thirds of savers who have opened cash ISAs on a 'teaser' introductory rate subsequently lose out because they do not move to a provider offering better rates of interest once the teaser period has lapsed.

Consumer Focus said that many of the best buy cash ISAs offer introductory bonus interest rates that fall after a fixed time, usually 12 months, often leaving savers with uncompetitive accounts.

Cash ISAs can pay as much as 3 per cent interest, but the average interest rate is just 0.43 per cent.

The study carried out by Consumer Focus found that almost a quarter of cash ISA savers did not know whether their accounts had a bonus rate, while a third of account holders with an introductory rate weren't sure if their rates had expired or not.

More than a third of savers who hold a cash ISA have had it for more than five years, suggesting they are losing out on interest that could be gained by switching.

I generally do promote ISA's as a tax saving tool but make sure you manage them properly and speak to a financial advisor regularly to make best use of them. Don’t just leave them to rot and hope for the best !

For further information contact mitch@ljd.uk.com