Posts Tagged ‘Stocks & Sharies ISA’
Thoughts of the week – Focus group findings
Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly.
Just back from the focus groups on our new ISA product.
It’s a little known fact that only a small percentage of the population use their Stocks & Shares ISA allowance, making it a middle class tax break for the wealthy and well advised only. But actually getting the face to face feedback (well from behind a screen) really underlines the problem.
The general population are not put off Stocks & Shares ISAs by the contents of the products. It’s just plain and simple ignorance and lack of information from the industry. You can actually watch the moment when the penny drops with investors when they realise that they are allowed two ISAs each year. For some it’s like discovering a pound in the bottom of your jeans pockets, for others there is an almost palpable fury that this information has been kept from them.
At a time when the political classes are clashing over the “bedroom tax” and everyone is scrapping about trying to save public expenditure whilst increasing the tax take, perhaps the government is colluding with the industry about this second ISA happily keeping people in the dark in case it costs them even more tax.
We usually put “Use it or lose it” in our ISA and tax exempt savings plan literature to illustrate to clients that if they don’t make use of these legitimate methods of paying less tax then they just lose them. But perhaps we ought to turn this against the industry? Start promoting the second ISA option to clients or lose it altogether?
Stocks and shares ISAs invest in the stock market, and the value of shares can go down as well as up and so returns are not guaranteed. Tax treatment depends on your individual circumstances and tax law may change in future.
No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.
What is an ISA?
In this article, Scottish Friendly look at the different types of ISAs available. If you’re considering setting up an ISA, either for yourself or for a child, the good news is that the process is fairly straightforward.
ISAs explained
An ISA is basically a tax-free wrapper that allows you to shelter your money from the taxman. There are three different types of ISA available — a Cash ISA, a Junior ISA and a Stocks and Shares ISA (sometimes called an Investment ISA).
With all types, any interest earned on savings or bonds and any capital gains made on investments within the ISA are tax free. Because of the tax breaks, there are limits on the amount that can be invested in each tax year. How much depends on the type of ISA you choose. Tax treatment depends on individual circumstances and tax law may change in the future.
What is a Cash ISA?
Usually offered by a bank or building society, a Cash ISA is a savings account where the interest isn’t taxed. Because of this, a Cash ISA can, in some cases, offer a higher rate of interest than taxed accounts from the same bank or building society. There are a variety of Cash ISAs to choose from, such as instant access, fixed rate and accounts with base rate guarantees.
How much can you put in a Cash ISA?
You can invest up to £5,640 in a Cash ISA in the current tax year (2012/13). As the maximum annual ISA allowance is £11,280, you can invest an additional £5,640 in a Stocks & Shares ISA.
What is a Junior ISA?
A Junior ISA (JISA) lets family and friends make long term tax-free investments for a child. Children under the age of 18, who didn’t qualify for a Child Trust Fund, are eligible. The JISA is held on behalf of the child, until they reach their 18th birthday. At that point, they may withdraw their money – the money in the account can only be taken out by the child – or allow the JISA to turn into a full adult ISA. Once set up, anyone can contribute to a JISA including friends, grandparents and family.
Types of Junior ISA
There are two types available — a Cash Junior ISA and a Stocks & Shares Junior ISA. A Cash Junior ISA works in the same way as a bank account where the money you pay in gains interest according to the bank’s rate.
The Scottish Friendly Junior ISA is a Stocks and Shares Junior ISA. In the case of this product, you can invest from as little as £10 a month, lump sums from just £50, or a mix of both. Your money would be invested in the stock market, so the value could go down as well as up.
How much can you invest?
The total amount you can invest is up to £3,600 in the current tax year (2012/13), less any amounts you may be saving in a Cash Junior ISA.
What is a Stock and Shares ISA?
A Stocks and Shares ISA – also referred to as an Investment ISA – invests your money in the stock market, in investment funds or individual stocks and shares. This type of ISA aims to provide capital growth in the longer term. It’s important to remember that your money is invested in the stock market, so the value can go down as well as up.
How much can you invest?
The total amount you can invest is up to £11,280 in the current tax year (2012/13). This is the maximum annual ISA allowance. You can choose to put the full allowance into a Stocks & Shares ISA or hold up to £5,640 of the allowance in a Cash ISA with another ISA manager.
You can invest from as little as £10 a month with a My Choice (ISA) from Scottish Friendly - or you can get started with a lump sum payment from upwards of £100 with this plan. Remember, the value of the My Choice (ISA) can go down as well as up and your original investment is not guaranteed. Please also note that tax treatment depends on your individual circumstances and the levels and basis of taxation may change in the future.
Scottish Friendly has provided no advice in relation to these plans. If you are in any doubt as to whether a plan is suitable for you, you should contact a financial advisor for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk Advisers may charge for providing such advice and should confirm any cost beforehand.
Saving and investing for the future
It’s fair to say that many of my female friends are confused about the best way to save for retirement. They know they have to do it but just keep putting it off. After all we’ve all got far more pressing priorities: new decking for the garden, a family holiday, even a savings account for the kids. But I know deep down it’s an absolute essential that my friends and I must take the issue of saving for retirement more seriously if we want to enjoy and embrace worry free finances in old-age.
I read recently that the gap between men and women’s retirement income is narrowing but women still have less to retire on. The typical sum men can expect to retire on in 2012, including company and state pensions is £15,500. Women can expect to retire on £12,2501.
Here‘s some of Scottish Friendly’s top tips to help my financial planning for saving for the future:
1. Do something about it now.
Regardless of age, stage of life or income, it’s really important for women to start taking retirement saving and investment seriously. It’s not a luxury….it’s an essential and, simply put, the earlier you start putting money away, the more you will potentially have to enjoy when you finally come to retire.
Most companies allow you to contribute to a pension scheme and many make reasonable contributions to help boost your pot. If you don’t like the idea of locking your money away, especially when it comes to your own personal savings and investments, then consider an ISA. Get into the regular habit of putting money away every month – soon you won’t even notice it coming from your monthly pay cheque.
2. Exploit the flexibility of an ISA.
ISAs are accessible; pensions generally aren’t. You can contribute as much or as little as you like to an ISA, subject to the annual ISA allowance, currently £11,280, and change the amount to suit your income at the time. For example if you take maternity leave, you can reduce your payments to the bare minimum (or even stop them) but can still contribute to your pot.
What’s more you can calculate how much you are going to save and invest over the plan period, which makes planning for the future a whole lot easier.
But one of the biggest benefits of an ISA is that they are completely tax free (other than taxes on dividends from UK companies) which means much more money for you and less for the taxman.
The two most common ISAs are a Cash ISA or a Stocks & Shares ISA. A Cash ISA is quite simply a savings account which holds your cash and earns interest. A Stocks & Shares ISA is an investment ISA which means your money can be invested in the stock market, property investments and company and Government bonds. Importantly using a Stocks & Shares ISA effectively doubles your ISA allowance when compared to just using your Cash ISA. So why pay more tax than you need to?
3. Decide how much you can afford to save and invest – then get started!
For many women, especially those with young families, it’s very difficult to put any money aside from their monthly income. With that in mind it’s important to sit down and really work out how much you can realistically afford to save and invest. But remember putting aside something for retirement should be a priority and not just something you do when you’ve got extra cash.
Think about what you waste money on every month. Can you cut down your daily Starbucks coffee to three a week or shave £10 from your weekly food shop? This might just allow you to put away an extra £50 a month to your ISA.
The benefit of using an ISA becomes clear even when you are only putting a small amount away. Unlike a pension, you are completely in control and your money isn’t locked away forever. That means getting started can be much easier with an ISA. Once you start a regular savings and investment habit you’ll soon realise how easy and painless it can actually be. Before you know it you’ll be setting aside monthly sums of money that right now you just never thought possible.
4. Share in your partner’s dreams
Retirement should be about enjoying life, and doing the things you didn’t get to do when you were working. For many, that means sharing exciting experiences with a partner so talk to your other half about their retirement plans. Do they match yours?
Are you both saving and investing enough to do what you really want to do together? Make sure between the two of you, you are saving enough to enjoy your well-deserved time together.
So now I know the importance of saving for my future and I’ve got some really good ideas on how to do it…..the challenge now is to get on and do it!
For more information on Scottish Friendly’s range of tax free savings plans or further information on saving for retirement log onto www.scottishfriendly.co.uk. But remember Scottish Friendly does not provide financial advice and can only give information on its own products. If you are in doubt of any aspect of financial planning, you should contact an independent financial adviser.
1Source: Sky News, 8 June, from a report by Prudential Insurance.
Investing in the New Year
The New Year is a time we all make resolutions for positive change. Maybe you’re thinking of starting that diet, reading that book, or joining the gym. If you’re willing to put a little time and effort in, you’ll find the returns can be very rewarding. The same goes for decisions about your financial future. It’s never too early to consider what you want to do with your money – or what you want your money to do for you!
Planning ahead with your finances can be a difficult task. With mounting financial pressures and an uncertain economic climate, it’s often hard enough managing your money in the here and now. But deciding to plan ahead means you’ll hopefully be in a great position to not only enjoy the potential returns your savings and investments can bring, such as a lump sum towards a holiday or luxury item, but deal with any unexpected costs or financial burdens, such as medical care.
Long term investments are a popular way of achieving those future financial goals and, with a huge range of products on the market, are something everyone can do. There are a great variety of products designed to help you and your family invest in the future without spoiling your enjoyment of the present!
- Tax Exempt Savings Plans: you can invest your money in schemes and accounts, which generate returns protected from the taxman. These types of plans allow you to invest from £15 to £25 per month and avoid tax on the growth of your money. This allowance is in addition to the limit set on ISA investment plans. Be aware, tax payments may be due if you access your plan before 10 years.
- ISAs: Stocks and shares ISAs are protected from income and capital gains tax, meaning the money you make goes directly to you. As with any stocks and shares account, the value of an investment can fall and rise and your original contribution is not guaranteed.
- Child and Family Investment Plans: an investment doesn’t just have to be for you – and if you’re looking for investment opportunities to benefit the future of your children or your family, there are products such as the Junior ISA which once set up can be paid into by every member of your family to benefit a child. When considering child investment plans, it’s important to consider investments as long term strategies and keep in mind they may fall in value.
However you choose to use your money in the New Year, be aware of the opportunities available to you. If you’re planning to invest, make sure you’ve considered your options and are happy you have chosen the right strategy. Making your money work doesn’t have to be difficult – and it’s something in which everyone in the family can be involved!