Investment News 2012 ISA Ideas 18471777
2012 ISA Ideas
20 February 2012 / by David Hughes
With the ISA season well and truly upon us, now is the time to consider all of the options available. We therefore give you a detailed round-up of our selection of the best that the market has to offer, for both Cash ISAs and Investment ISAs.
Below we have listed some of the most popular ISA plans currently available. To help you further, we have split these into user-friendly categories and, where appropriate, divided them by term, since our feedback from clients shows us that the return available and the length of time your money is tied up are the two most important factors when deciding which route to take.
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 RBS 1 Year Fixed Rate Cash ISA is offering up to 3.35% provided you transfer in an existing Cash ISA (not including transfers from RBS or NatWest). The minimum deposit is £1,000 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 3 and 5 years. A rate of 4.20% is market-leading across both of these terms from NatWest provided you transfer an existing Cash ISA, or alternatively through Halifax’s 5 year Fixed Rate Cash ISA, with a minimum deposit of £500.
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 Income Deposit Plan from Meteor offers 7.25% for each year the FTSE 100 remains between 4,250 and 7,000. 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 4.20%, 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, Investec’s 3 Year Deposit Plan offers a 19% return provided the FTSE finishes higher than its starting level (subject to averaging), which equates to a compound return of nearly 6% a year.
In the medium to longer term, higher rates are also available. Investec’s FTSE 100 Kick Out Deposit Plan offers a return of 6.25% times the number of years the plan has been in place. The plan has a five year term but will mature early or ‘kick out’ from year 2 onwards provided the FTSE finishes higher than its starting value. As an alternative, Morgan Stanley’s Accumulator Deposit Plan locks in 6% for each year the FTSE ends higher than its starting value and also has a memory feature which allows you to catch up on any years which did not provide a return. The capital protection here is provided by LloydsTSB.
Finally, Legal & General’s Inflation Protected Deposit Bond offers a minimum return of 16% or, if higher, any increase in the Retail Price Index over the term. This plan is for those who want to hedge their savings against the effects of inflation and who are worried not so much about the next 12 months, but what could happen over the next 5 years.
All of the above plans will accept Cash ISA transfers. Click here to find out more about Fixed Rate Cash ISA Alternatives »
The Bonus Income Plan from Investec is a real stand-out. The plan pays a fixed income of 7.00% each year with an additional 0.50% bonus for each year the FTSE 100 is higher than its starting value. Capital is at risk if the FTSE drops by more than 50% during the plan, and the plan also has a monthly income option.
High yields are also available from investment funds but unlike the Investec plan, these returns are not fixed. Invesco Perpetual’s Monthly Income Plus fund has a current distribution yield of 7.19%* and pays income each month whilst Newton’s Higher Income fund has a historical yield of 7.02%* and pays quarterly. For a managed fund option, Invesco Perpetual’s Distribution fund has a distribution yield of 6.88%* and pays income monthly.
All of these funds have a 0.00% initial charge when invested through the Fair Investment Fund Supermarket and you can also transfer your existing funds at no charge.
Click here to look at more Income Investment ISA options »
For those Investment ISAs offering a defined return, the most popular type of investment in the growth sector is the Kick Out plan which offers the opportunity to mature early, normally each year. The highest rate available is through Investec’s Enhanced Kick Out Plan which will return 13.5% per year (not compounded) should the FTSE finish higher at the end of the year than its starting value. Therefore, the FTSE only has to go up a little in order for the plan to mature early. Capital is at risk if the FTSE falls by more than 50% during the 5 year investment term.
For those looking for a defensive option, Morgan Stanley’s FTSE Booster Plan offers the potential for a fixed return of 60% (equivalent to approximately 8.25% per year compound) provided the FTSE does not fall by more than 20%. Capital is at risk but the plan also contains a unique booster feature which means a positive return can be achieved even if the FTSE falls by up to 50%.
For those looking for investment fund growth options, the Fair Investment Fund Supermarket has over 1,500 funds from more than 90 investment managers. Current highlights include M&G’s Recovery fund which focuses on UK equities and is AAA rated by Morningstar, S&P and OBSR**. Our global equity pick is Neptune’s Global Equity fund which has outperformed its benchmark by over 100% since launch and is also AAA rated by OBSR**.
We also provide you with our popular choices and our fund selections across a number of other sectors including Emerging Market funds, Ethical funds, Managed funds, Bond funds and Absolute Return. Our current selection includes Aberdeen’s Emerging Market fund which is top quartile over 1, 3 and 5 years and is AAA rated by OBSR*. Please visit our Growth Fund Selection for more details.
All of the funds detailed above have a 0.00% initial charge when invested through the Fair Investment Fund Supermarket and you can also transfer your existing holdings at no charge.
Click here to look at more Growth Investment ISA options »
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 (email@example.com) or telephone on 0845 308 2525.
* data correct as at 31/01/2012
** data correct as at 31/12/2011
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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