ISAs are an increasingly popular form of savings plan, because they give your money the potential to grow more or less free of tax and there is no tax to pay when you take money out. But it is important to choose an ISA that offers the potential for real growth and suits your particular circumstances.
If you have savings you should consider holding them in an ISA – there is no tax to pay on any income or interest you receive from them or on any gains you have made when you cash them in. This makes them an attractive way of saving for the future – whether to pay for your children or grandchildren’s education, or to boost your income later in life. Plus, you can take money out whenever you want.
Which type of ISA?
There are ISAs to suit most people – cash, investment funds (known as stocks and shares), or a mixture. Cash ISAs are like savings accounts but with the tax advantages of an ISA. However, with interest rates still very low and inflation relatively high, the value of your savings is likely to fall. In the past, investments in stocks and shares ISAs have provided a better way of achieving growth that outstrips inflation over the longer term.
An ISA designed to help you achieve your financial goals
There is, of course, a risk attached to investing, but choosing a suitable fund and investing for the longer term gives your money more chance to perform as you expect. Funds which invest in a diverse selection of investments have the advantage of giving you instant access to a wide range of holdings within a single fund. It is also important to consider funds that are specifically designed to help you achieve your financial goals.
The value of your investments can go down as well as up, so you could get back less than you invested.