ISAs are becoming increasingly popular with savers with ISAs overtaking pensions in popularity according to the Office of National Statistics in 2011. With the ISA allowance increasing every year in line with consumer price inflation you can currently put up to £5,640 into a tax free cash ISA.
Nearly Half way through the 2012-13 ISA year we have put together a detailed round-up of our selection of the best cash ISA options available.
Cash ISA Options
The pick of the instant access Cash ISAs is the ING Direct Cash ISA, paying 3.00% AER. This rate is guaranteed for a minimum of 12 months and the interest is paid monthly. The account can be opened with a minimum of £1 and you are able to transfer previous years’ Cash ISAs into it. Just remember that after the 12 months, the rate will revert to their standard variable rate (currently 1%) so you will need to consider your options again at this time.
In the shorter term, the 1 year Virgin Fixed Rate Cash ISA is offering 3.00% AER. The minimum deposit is £1 and you can apply online.
The medium to longer term fixed rate market is rather uncompetitive at present with little difference available in rates between 1 and 5 years. A rate of 3.30% AER is available from Virgin money for a 3 year term is market-leading.
Cash ISA Alternatives
The current lack of competitive fixed rate Cash ISAs has greatly increased the interest in alternatives. Structured Deposits offer a combination of capital protection with the opportunity to receive a higher return (normally linked to the FTSE 100 Index). Since these are deposits, they are also eligible for the Financial Services Compensation Scheme.
For those looking for income, the Meteor FTSE Income Deposit Plan offers 6% pa with capital protection as long as the FTSE 100 remains between 4,750 and 7,000 points. The capital protection is provided by the Royal Bank of Scotland and transfers are accepted. Since this is held within a Cash ISA the income is tax free and compared to current longer term fixed rates of 4.50%, this is a considerable difference in potential upside.
For those looking for growth from their investment, there is a wide choice available. In the shorter term the Investec 3 Year Deposit Plan offers a 15% return provided the FTSE finishes higher than its starting level (subject to averaging).
In the medium to longer term, higher rates are also available. Gilliat Financial Solutions who are part of the Arbuthnot Banking Group are offering a plan that provides capital protection and the potential for 7.75% a year with early maturity. The Gilliat Deposit Kick Out Plan has a 6 year and 2 week term but will mature early or ‘kick out’ from year 2 onwards based on the performance of six stock market listed companies.
Finally the Legal & General Growth Deposit Bond offers a minimum return of 7.5% or 100% of any growth in the FTSE 100 index capped at 40% of your original investment if higher. The Bond is capital protcted and is for a 6 year investment term.
All of the above plans will accept Cash ISA transfers. Click here to find out more about Fixed Rate Cash ISA Alternatives »
Important Reminder - why do an ISA?
The main reason for using an ISA concerns the tax advantages, since no tax is payable on the income you receive or on any capital gains that you make and there is no need to declare any ISA income or capital gains on your tax return. ISAs therefore provide tax-efficient investment growth, the value of which is compounded over time.
For help and guidance at this important time of year, please see our Top 10 Tips for ISA season. Please also note that with all of these options, our experienced Investment Customer Services team is always on hand to answer any questions, either by email (firstname.lastname@example.org) or telephone on 0845 308 2525.
* data correct as at 28/09/2012
No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors. Tax treatment depends on your individual circumstances and may change.
Some structured investment plans are not capital protected and there may be the risk of losing some or all of your initial investment. There is also a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated, in which case you may not be entitled to compensation from the Financial Services Compensation Scheme (FSCS). In addition, you may not get back the full amount invested if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.
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Important Risk Information:
This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future. The products shown will be arranged on a non-advisory basis, unless otherwise agreed. Different types of investment carry different levels of risk and may not be suitable for all investors.
Please ensure that you read the Important Risk Information for further details. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are at all unsure of the suitability of a particular product for your circumstances you should seek independent financial advice. Please refer to our Non Advisory Terms of Business and Disclaimer & Privacy Statement for further information.
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