From the beginning of the 2017/18 tax year the amount that individuals are able to save into ISAs will increase from £15,240.00 to £20,000.00, an increase that was originally mentioned by George Osborne in the March 2016 Budget as a way "to further help savers at a time of unprecedentedly low interest rates".
With interest rates so low what is the benefit of saving money into an ISA? Put simply, if you have to give less money to the taxman then you have more money to do with what you want, an ISA is one of the simplest ways to do this. In the current climate it is more important than ever for you to be able to benefit from any growth that your savings make.
In addition to their tax free status, cash ISAs also benefit from an ability to be switched into Stocks & Shares ISAs without utilising any of your annual allowance. Over the past 12 months cash investments such as ISAs have returned on average 0.23% which is a very poor return but even more so when compared against inflation over the same period of 2.80%. Just to clarify, if you held money in cash, ISAs or any other savings account, it has lost its real value by 2.57% over the past 12 months.
Fortunately ISAs give individuals a lot of flexibility in terms of what can be held in them. As I mentioned you can transfer your poor performing cash ISA into a Stocks & Shares ISA and had you invested in a UK FTSE 100 tracker fund over the past 12 months you would have seen growth of over 23.00%.
For those who might have built up substantial balances in cash ISAs over the years and who are continuing to suffer from low interest rates, the importance of a full financial review is even greater.
It is important to note that the past performance of markets is not an indication of future performance and Stocks & Shares ISA are not right for everyone. At Ware & Kay Financial Services we can provide a free consultation to help you decide if investing is right for you and your money.
Please contact us at firstname.lastname@example.org for more information and to arrange your free consultation.