Happy Birthday ISAs: 20 years old in 201915 November 2019
ISAs are 20 years old this year! They first started in April 1999 and, looking at the stats, at the end of 2017-18 the market value of adult ISA holdings stood at £608 billion, with £69 billion being paid into ISAs in the same year. 10.8 million accounts were paid into in 2017-2018...that's a lot of saving, on average £6,409 to an adult ISA account!
More detail on their usage and success over the years can be found here: Full_ISA_Statistics_Release_April_2019.pdf
Chapters Financial is not responsible for the content of external websites
One ISA option, designed to help the younger generations onto the property market (the Help to Buy ISA) ends this month, November 2019, and November also sees many minds turn towards the needs of the family as we start to head towards Christmas. Let's look at the various ISA options available.
- ISA general / adult
As an adult, you can save up to £20,000 a year into an ISA, the benefit being that the proceeds that you receive are tax efficient. You can have a cash ISA, like a tax efficient deposit account, or a stocks and shares ISA, which usually carries more risk. You can have a bit of both if you choose, but you can only contribute to one cash ISA and one stocks and shares ISA in a year. Each tax year the allowance is (usually) restored and you can save again, either with lump sums or monthly savings (or both).
- Junior ISA
If you feel a bit left out as a younger member of society, you can have a Junior ISA on a similar basis and save up to £4,368 per annum in a tax efficient account in this tax year (Junior ISAs started in November 2011, with around 907,000 Junior ISA accounts subscribed to in 2017-18). This can be a great way for parents and grandparents to save for a child's future education or house deposit, as examples.
- Help to Buy ISA – ends this month
Help to Buy ISAs are a type of cash ISA designed to help first-time buyers save up a deposit for their first home. They are available to anyone who is over 16 and a first-time buyer. The government will add 25% to the savings an individual makes, up to a maximum of £3,000 on savings of £12,000. Eligible individuals can save up to £200 a month into a Help to Buy ISA and in the first month, a lump sum of up to £1,000 can also be deposited.
You won't be able to open a new Help to Buy ISA after the end of November, so if you think this type of arrangement might benefit you, or a young person you know, then have a look before applications close.
As you would expect, there are a large number of strict conditions that apply to this type of ISA arrangement and it would be important to review these before committing any savings to ensure that the Help to Buy ISA is right for a young person and their circumstances. For example, as the name indicates, the arrangement is designed purely to help in the purchase of a first home, and the government bonus is only applied for by a solicitor or conveyancer when the purchase is certain to proceed.
More details can be found on the Money Advice Service website and on the government helptobuy.gov.uk website.
Other types of ISA
- Lifetime ISA
The Lifetime ISA was announced at Budget 2016 and became available in April 2017. People who are under the age of 40 can open a Lifetime ISA and save up to £4,000 per year. The government will then top this amount up by 25%. This means that for people who save the maximum each year, the government will top up the account with £1,000.
Lifetime ISA funds can be put toward a deposit for a home that is worth a maximum of £450,000 in all areas of the UK, or taken at age 60 to be used as retirement income.
It is worth bearing in mind that investments in Lifetime ISAs do not benefit from Financial Services Compensation Scheme (FSCS) protection.
- Innovative Finance ISA
Another new kid on the block, started in April 2016. An Innovative Finance ISA (IFISA) allows you to make peer-to-peer (P2P) lending investments within a tax-free wrapper. The allowance can be fully invested in an Innovative Finance ISA, or spread across the different types of ISA.
If you have not looked at your savings recently, and from the stats above, many have, then make November 2019 the time to get it sorted, both for you, but also your family.
If you would like to consider your savings and investment opportunities a stage further, then please contact the team at Chapters Financial in Guildford. No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899