ISA's FAQ's
Q - How much can I invest into an ISA each year ?
A - This current tax year, a total of £10,200 can be invested into an ISA
Q - The bank told me I can only invest £5,100 this year - how is this ?
A - There is a maximum limit of £5,100 allowed to be invested into Cash ISAs in any one tax year, the rest can be invested into Investment ISAs
Q - Can I invest more than £5,100 into an investment ISA ?
A - Yes, the total allowance is £10,200, of which no more than £5,100 can be invested in a cash ISA
Q - What is the difference between a Mini ISA, a Maxi ISA and a TESSA ISA ?
A - These relate to historical terms. Originally, the whole structure was somewhat complex - you could invest no more than £7,000 each year into an ISA, if you opted for a mini ISA, £3,000 could be in cash, £3,000 in investments, and £1,000 in insurance (however this was very unpopular). You could not have a maxi and a mini in the same year. The TESSA ISA was reserved only for funds from a previously held TESSA
Q - What is the point of an ISA?
A - Tax efficient growth an income - either from cash savings or investments
Q- How long does it have to stay there
A - This depends on the original contract. Many Cash or Investment based ISAs have no term or notice period, whereas some fixed rate returns may require a specified notice period.
Q - My interest rate is terrible, shall I cash in the ISA and invest somewhere else ?
A - Not necessarily, you should be able to transfer most Cash ISAs to another provider, or if the potential for greater growth was desired, it is now possible to transfer your Cash ISA into an investment ISA
Q - Does the transfer use up this year's allowance?
A - No, the contribution limit of £10,200 is based on the amount of new money you invest in an ISA each tax year
Q - Someone said that ISAs are a bad investment as they lost money - what is the truth in this?
A - An ISA is purely a tax efficient umbrella for either cash or an investment. If an investment drops in value, it will do so whether it is tax sheltered by an ISA or not. It I not the ISA as such which has performed badly, but the actual underlying investment.
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Q - Where should I invest for good growth ?
A - This depends on how long you are prepared to invest for, other back up funds you have available, your investment expectations. All in all - correctly assessing your attitude to investment risk.
Q - How do I know what my attitude to risk is, and where I should invest ?
A - In the past, you may have been given a choice of deciding if you are low, medium or high risk - most people chose medium, and were invested wholly into the UK stockmarket. Nowadays, it would be proper to discuss with a qualified Independent Financial Adviser your requirements, and complete a questionnaire, the answers of which will determine the correct investment portfolio for you.
Q - I invested in the past, and never saw the adviser again, how will I know what is happening to my money?
A - These days, a reputable adviser would remain in touch, and at least review the investment once a year with you. Some portfolios are automatically reviewed every three months or more frequently. These days, you ought to be able to review your investments on-line if the adviser does disappear into thin air.
Q - What should I look for in a reputable adviser ?
A - By 2012, all advisers must have a certain qualification - at least a Diploma in Financial Services (DipPFS). Many are now studying towards this. Also, by the end of 2012, no adviser is permitted to earn commission from investment or pension business - the charges must be explicit and agreed up front.
Q - How much will the advise cost ?
A - This varies from adviser to adviser, some will have a flat fee, some will charge a percentage up front, and an amount each year to manage the money properly.