Often Regular Savings are completed within an ISA. What is an ISA?
ISA stands for Individual Savings Account. ISAs are accounts which can be used to hold many types of savings and investment products. They have replaced
Personal Equity Plans (PEPs) from April 1999.
ISAs can include one or more components:
Cash (bank and building society savings accounts, National Savings & Investments)
Stocks and Shares (unit trusts, shares, bonds and so on).
There are strict rules regarding the maximum amount allowed for each component and the overall amount you can invest in any one tax year. Any UK resident
over the age of 16 can buy a cash mini ISA. Any UK resident over 18 can buy any other sort of ISA.
Short term saving – Emergency fund
This means building up a fund for your immediate needs and for any emergencies (often called 'rainy day' savings).
If you are thinking about saving for the short term, for immediate needs and emergencies. You should think about opening a bank, building society or
National Savings and Investments account which gives you quick and easy access to your money. All of these have a cash ISA version, which could be a
good home for your emergency fund if you pay tax.
Medium-term saving and investing (up to 5 years)
A bank or building society can still be a good choice. Many of these accounts pay more interest if you have to give a period of notice before you
withdraw your money, often up to several months.
If you pay income tax you could consider a mini cash ISA, or the cash component of a maxi ISA. However, if you do not pay tax there is no tax advantage
to you in saving through an ISA, though sometimes ISAs offer higher rates anyway than other types of account. You need to check out the offers available
- see Shopping Around.
Longer-term saving and investing (more than 5 years)
If you pay tax and can afford to leave your money for 5 years or longer, it's worth considering a stocks and shares ISA. Over the longer term you are
likely to get a better return for your money than with a deposit-based bank account.
Once you have used your ISA allowance you should then consider an Investment product.
But remember there is a risk involved as the value of your investment could go down, as well as up. Also remember that if you take your money out after
only a few years you may get back less than you put in.
If you have money that you do not need to touch until you are over 50, you may want to consider a pension instead of an ISA.
Once you have completed your Savings and/or Investment product purchase
Please don’t forget these must be reviewed regularly.
As your life and the world around you change, your financial plan will need to adjust and adapt. So review your financial plan:
Regularly for short to medium-term goals, to check that you are still on track.
Once a year in the case of major long-term goals, such as paying off your mortgage or building up a pension fund, to check that you're on track.
Whenever your circumstances change - for example, if you get a pay rise, lose your job, get married or get divorced, have children, buy a house, a family
member dies, you get an unexpected windfall, and so on.
You need to review your plans performance to ensure that it is performing in accordance with your expectations. Also does your plan still match your
current ‘attitude to risk’?
Always seek Independent Investment Advice
There are hundreds of investment products available from many different companies, choosing one that's right for you might seem like an uphill struggle.
Not all financial advisers can give Independent advice. Some are tied to specific lenders and/or a panel of lenders also many are not authorised to
provide Independent advice on the associated insurance products and again are either tied to a specific provider or a panel of providers. Please make
sure the broker you are dealing with offers ‘Whole of Market’ mortgage advice together with Independent Financial advice.
We give totally independent unbiased advice, from the ‘Whole of Market’.
Please note & remember
How well your investment grows will usually be the single most important factor determining how much money you get back from your investment. But this is
not something you can predict. Past performance is NOT a guide to the future.
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