Posts tagged ‘ISAs’

May 1, 2010

money stuff {ISAs}

As a student the only thing I looked for in a bank account was the biggest interest free overdraft!  Well those days are gone and its time to start thinking about savings.  Ideally I would like to buy a house as soon as possible and with the economy still uncertain it is almost impossible to get a mortgage without anything less than a 10% deposit so it´s time to start saving.  If you are new to saving, websites such as moneysupermarket and moneysavingexpert offer great advice and answer all your questions and doubts.  Although don´t just blindly pick the top bank that the websites suggest as I have my suspicions about how reliable their lists are – especially seeing as both websites recommend totally different banks!

I suggest you use these websites to get your head around what you need to look for in an ISA and then do your own searching.  Have a checklist close to hand about all things that need to be considered and apply them to each bank until you find the one most suitable for you.  I have done just that:

The basics:

*An ISA is a saving account that allows you to save up to £10,200 a year tax-free.

*Cash savings are limited to £5,100 but the rest can be made up of stocks and shares (Alternatively you can save the entire £10,200 in stocks and shares or £3000 in a cash ISA and £7000 in stocks and shares etc).

*For cash ISAs there are 3 different types of accounts(1) fixed rate (2) notice (3) easy access.

*(1) Fixed rate means that you are tied to an account for a certain amount of time and you cannot withdraw your money without penalties and losing your interest.  These generally offer better interest rates.

*(3) Easy access normally offers flexible interest rates but allows you to take your money out whenever you need without being subjected to penalties (although each account varies so you must check the Ts&Cs).

*Many accounts offer an introductory bonus of about 1%.  This may come to an end after a year so make sure you remember to transfer your money to a different ISA offering a better interest rate.

*The amount required to open an account varies according to the bank.  It can be as little as £1.

*Some accounts allow you to pay money in regularly whereas others only allow you to pay in 1 lump sum.

*The tax year runs from 6th April – 5th April the following year.

*You can transfer cash ISAs into equity/bond ISAs but not the other way round.

* As long as the bank is FSCS (UK) regulated up to £50,000 of your savings are guaranteed if the bank goes bankrupt.

Check list:

√ What is the interest rate?

√ Is this interest rate applicable to the amount of money I have? (For example some accounts offer an interest rate of 3.20% however this is only applicable to savings of more than £9000.  If you have less than £9000 the interest rate may be significantly lower)

√ Is this fixed or variable?

√ If it is variable: how much above the base rate does it guarantee? (The base rate is set by the Bank of England)

√ If it is fixed: how long must I have the account?

√ Is the interest paid at the end of each year or each month?

√ Can I freely withdraw money or will I be subjected to penalties?

√ Can I pay money in regularly or does it only allow 1 lump payment?

√ How much do I need to start the account?

√ Does the account allow transfers in from other ISAs?

√ Does the account allow transfers out at the end of the year without penalties?

√ How can I access the account? (i.e. branch/phone/post/internet).

√ Is the banks FSCS regulated?

Right – time to get saving!

Please note all information given is not set-in stone.  Make sure you are ISA savvy by doing your own research!

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