The tax-free status of ISAs is so attractive, the government limits how much you can invest each year.
It means getting the right ISA to make the most of your allowance is essential.
At Continuum we are looking at how to keep an eye on your ISA.
ISAs can help you grow your wealth, by letting you enjoy the return on savings and investments tax-free. But there are many types of ISA, and although all offer tax-free growth, some deliver better performance than others. It is not enough to find a top performing fund and stick with it. Market conditions change, and the ISA which lead the field a few years ago might be much less rewarding now in the aftermath of Covid. For example, these days there are Cash ISAs that pay as little as 0.10% interest.
You should receive annual statements from your ISA provider. These may be electronic and require you to go online to see them. Then you need to check your ISAs performance against industry benchmarks. This can be difficult unless you are a financial expert, so the simple solution is to call on us at Continuum. We can look at the returns your ISA is delivering, see how it compares against the best returns currently available, and whether the charges made by your provider are fair – or whittling away at the profits you should be enjoying.
What if your ISA is underperforming?
You need to be sure the providers you have selected are making your money work as hard as possible. Remember that you don’t need to invest more money in the fund you chose last year. There is nothing to stop you from choosing a new ISA each year
You don’t have to leave your money in an underperforming fund. You can transfer money you already have inside your ISAs to another ISA and retain its tax-free status. This means that you can transfer to a better performing provider, or to a different type of ISA altogether. Most people will want to move out of Cash ISAs, which now offer low interest rates and poor returns, into Stock and Shares ISAs with the potential for exciting returns as the economy recovers from Covid.
This ability to transfer ISA funds means that you can shop around for potentially better returns and if you already have several ISAs you can transfer all of your money to one place. Transfers of funds you put in an ISA in previous tax years don’t affect your annual ISA allowance.
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But a word of caution. It is vital to transfer your ISA funds in the correct way. If you withdraw money you’ll lose the tax benefits you have built up and it will count towards your annual allowance if you try to reinvest it elsewhere. But by using your new provider’s transfer service your money can retain its ISA wrapper status and the transfer won’t affect your annual allowance.
The best solution may be to call on us at Continuum to review your current ISA arrangements and if necessary, to let us find the funds that can offer the performance you need. You need to look carefully at what each ISA provider is offering and what they are charging for their services. It can be a time consuming task if you try to do it yourself, because there are hundreds to choose from.
You need professional help from Continuum to make the most of your ISA investments – particularly in an economy which is changing fast. Contact us now for the help you need.
Fortunately, at Continuum, we know the ISA market – and we know how to help you make the choices and the transfers that are most appropriate for you.
If you are ready to make the most of your ISA, make your first move a call to us.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
Equity investments do not afford the same capital security as deposit accounts.