ISA
ISA is considered as a combination of savings and investment and millions of UK citizens have profited from it from the time when it was introduced. Unlike its predecessors Personal Equity Plans (PEP) and Tax-Exempt Special Savings Account (TESSA), this new savings scheme was designed to encourage consumers of different classes to deposit cash on banks where they will enjoy the interest rate and in turn helping the entire UK economy. An ISA allows savers to enjoy their savings without having the tax bureau reaching for a piece of it.
ISA interest rates doesn’t have a standard rate since banks or building societies decide how much it should be. Cash access also vary since some ISAs have fixed rate and fixed terms where you can’t take out your money until the term ends while some ISA polices allow savers to easily access their cash.
The basic types of ISAs are Cash ISA and Stocks and Shares ISAs. A person should be 16 years of age in order to open a Cash ISA while opening a Stocks and Shares ISA will call for individuals to be 18 at least 18 years old. Also, for individuals who were born before April 5 1960, an amount of £10,200 is their ISA allowance annually and for persons who are born after April 5 1960 has an ISA allowance of £7,200 but these sums is supposed to go up to £10,200 by April 6 2010.
So why are April 5 and April 6 has a lot to do with things? These two dates are the start and end of each tax year. Furthermore, your ISA allowance should be used before April 5 or else you will lose it by April 6 which is the commencement of a new tax year.
Since the credit crunch, the Bank of England’s base rate has sunk to a mere 0.5% annually. So shopping around for ISAs will be a wise move on your part so you can select between providers that offer a good rate. Sadly, the slow economic recovery is making ISA interest rate lower to as low as 0.1%. To have a clearer picture of how low this rate is, multiply an amount by .001. Presently, the highest interest rate you can get on an ISA is a maximum of 2.75%.
While 2.75% is already considered a high rate, an ISA rate can still go further to more than 4%. An ISA with a minimum fixed term of five years can offer as much as 4.6% yearly and this type of ISA just like a time deposit. You should conscientiously think before making a large deposit to this kind of ISA given that you won’t be able to have access to it within the term.
If you already have an ISA account, you can also opt for a balance transfer to another bank that presents a higher rate. But you should not close your account or withdraw the money because that is not how it works. What you need to do is let your present bank transfer the account to the new one.
To save you the trouble of waiting in long lines, you should open an ISA savings account before the tax year ends. Between March to the first week of April, it has been proven that more people open ISA accounts than other time of the year. If you open an ISA in a much earlier date, you will earn money much sooner and you will also be spared from the rush.
This entry was posted on Sunday, February 28th, 2010 at 5:00 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.