Top ISA tips from Nationwide
08 February 2011
According to the building society, some £200 billion is currently deposited in ISA accounts, which provide regular people with one of the few opportunities they will have to "beat the tax man", as it were.
Robin Bailey, director of savings and investments at Nationwide, shared his top tips for maximising your tax-free savings allowance.
Make the most of your ISA – Although ISAs have been available for several years, many consumers are failing to take advantage of them, even though they offer potentially significant savings. Cash ISAs alone are estimated to be saving consumers more than £680 million in tax every year, despite the fact that two-thirds do not have an account. Worse still, only one in seven have a stocks and shares ISA.
Base your choices on how you feel about risk – As with most financial products, riskier ISA offerings promise potentially greater rewards. In this case, consumers will find a range of different ISA options with varying rates of potential return based on the risk. While a cash ISA comes with minimal risk and is a great starting pot for savings, stocks and shares accounts can potentially be much riskier, but the money in an account can work much harder as well. Nationwide recommends stocks and shares ISAs as a longer-term option, with it typically being the case that it will take five years or more to get a strong return on savings.
Make sure to search the market – Again, like with any other financial product, it is important that people consider all of the available options before choosing an ISA. For example, stocks and shares accounts have been much more popular during the recession – they enjoyed their strongest year in terms of sales since 2001 – possibly due to the fact that low interest rates makes this type of investment more attractive.
"Unfortunately, too many customers stop once they have used their cash ISA allowance and fail to take full advantage of their full £10,200 allowance so ending up paying tax on the interest they earn on their remaining savings," said Mr Bailey.