New Cash ISA limits - A damp squib?
With the new ISA rules coming into effect on 1st July, Scottish Friendly is today warning savers to be wary of being drawn automatically into holding all their ISA funds in cash and to consider the alternative funds available through ISA investments.
In recent weeks a number of savings providers have started to lower their already low interest rates even further in anticipation of the launch of the NISA and the mutual organisation, believes that more needs to be done to communicate the alternatives that are available to ISA investors.
Neil Lovatt, Scottish Friendly’s Director of Financial Products, said:
For every one investment ISA taken out, three cash ISAs are opened.
Cash is easier to understand as it offers security and access to the savings without penalty that investment ISAs do not. People are being put off by what they think is pure equity investments and instead are opting for accounts that offer poor returns on their cash.
The changes introduced in the budget gave savers a glimmer of hope and incentivised people to put more money aside each month. However, the Cash ISA market has not risen to the opportunity, instead choosing to offer low rates of interest on cash ISAs and in some cases actually reducing their rates for fear of overly high inflows.
Scottish Friendly’s My Prosperity (New ISA) invests in a with-profits fund, which offers a balance of investments including stocks and shares, cash, fixed interest and property funds. The investment also guarantees that if the investment is cashed in on its tenth anniversary the investor is guaranteed to get back at least the amount originally invested provided all payments have been kept up to date and no withdrawals have been taken.
When the investor cashes in or takes a withdrawal from Scottish Friendly’s My Prosperity (New ISA), the value of units may either be increased by a final bonus or reduced by a market value reduction (meaning the investor could get back less than has been invested) to bring it into line with the performance of the assets within the With-Profits fund.
No advice has been provided by Scottish Friendly in relation to this plan. If you are in any doubt as to whether this 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.