To ISAs or not to ISA

What is an ISA?

The dictionary term is: – “an Individual Savings Account (ISA) allows individuals to hold cash, shares and/or unit trusts tax-free on dividends, interest and capital gains.

What does this mean?

Each tax year the Government ‘generously’ gives us a tax-free allowance on savings held within an ISA.

In July 2014, the Government increased this allowance to £15,000.  The Government has already announced the new ISA allowance the coming 2015/16-tax year of  £15,240.

Growth or income from ISAs is tax-free.  You don’t even need to declare the income you receive on your tax return.

provided you have not exceeded your allowance for the tax year.

What’s the difference between the different types of ISAs?

There are two types:

CASH ISA

A Cash ISA works pretty much the same as any other savings accounts except the interest earnt is tax-free.

This type of ISA is great for someone that wants to be tax efficient, but may need access to the cash to cover unexpected bills.  Within a Cash ISA your cash remains as cash and can therefore be removed at any time.  You can add to your ISA but only up to the £15,000 withdrawn

The downside to Cash ISAs is that interest rates are still very low.  Cash is an inefficient way to save for long term goals.

STOCKS & SHARES ISA

A Stocks and Shares ISA invests your money in other equities such as Gilts and Bonds to Unit Trusts and Investment Trusts and OEICS a range of stocks and shares from government stocks and bonds to unit trust and holdings in blue-chip companies.  It can also hold cash much the same as a Cash ISA.

Compared to a Cash ISA, a Stocks and Shares ISA has a higher potential return but with it comes a greater risk and cash may not be instantly available.  The value may experience fluctuations in accordance with the market.

A Equity ISA should be considered as a long-term investment (3-5 years) rather than a short-term cash holding.  Most often, this suites people with a little more cash spare or people looking at longer term savings or goals, as their ISA allows them to invest tax-free in the long-term, but still leaves them with liquid assets available in case of an emergency.

Who can open an ISA?

ISAs are open to UK residents only (Crown Employees).  Cash ISAs can be opened from the age of 16 with Stocks and Shares ISAs from 18.  

There are special Junior ISAs available with some extra rules, if you would like more information about Junior ISAs, please contact us.

It’s important to note that ISAs can only be opened in an individual’s name.  They cannot be opened jointly which means that a couple can have two ISA allowances each year.

ISA Golden Rules

1.              You can only open one ‘new’ ISA of each type each year.

2.              You have one allowance per tax year, per person.  You can choose to place this all in a Cash ISA or all in a Stocks and Shares ISA or you can opt to mix and match and spilt your allowance between a Cash ISA or a Stocks and Shares ISA.

3.              If you fail to use your ISA allowance before the end of the tax year it cannot be rolled over so once it’s gone it’s gone.

4.              If you want to switch providers for any reason, no problem, just remember do not remove or disinvest yourself.  Once it has been removed from it’s ISA ‘wrapping’ anything that was within it looses its tax-free status.  Your new provider will do the transfer for you, which retains the ISA status and does not effect this years’ allowance.

Should you wish to discuss ISAs or any other element of your financial planning needs, please call us on 01636 870 069.

Inflation: Are we looking at goods times or more bad times?

With inflation sitting at it’s lowest in a decade and half (1.5% below the Bank of England’s target of 2%) and now finally below wage increases; are we set to see an end to the longest economic squeeze since Victorian times?  Lets examine the evidence:

We are already seeing a significant fall in oil prices, now approaching their lowest since records began in 1989, and in all likelihood inflation will probably follow.  Capital Economics have suggested that the average household is set to benefit around £455 per year just in the fall of oil prices alone.

We are also likely to see a “tax cut” in other areas over the next coming months and with low inflation and rises in wages this means our pockets are going to be a little fuller than they have been over the last couple of years.

But low inflation and falling prices are only good in the short term.  Over the long term, Economists have concerns that we may see ‘bad inflation’ similar to that witnessed in the US in the 1930s when inflation continued to fall with wages following shortly afterwards.  This kind of ‘bad inflation’ last longer, has weaker growth and therefore takes longer for the economy to recover.

There are already concerns that this is already starting to evidence itself in Europe (not including the fall in oil prices), particularly in Greece.  In an attempt to prevent this, European Central Bank is set to begin quantitative easing in the coming months and with this carries risk and unpredictability.

So whilst in the short term we are expecting to see cheaper prices, increases to wages and an overall improvement in the standard of living, in the long term, however, things are still uncertain for the time being.

Income Protection if you have to become a Carer

Income Protection if you have to become a Carer

Most people consider protecting their income if they become unable to work due to their own ill health.  However, it is estimated that 3 out of 5 people will become a Carer for a relative at some point in their lives.  If this were to happen to you, could your family afford for you to give up work?  In most cases, probably not!

Friends Life have recently introduced Family Carer Benefit within their Income Protection policies.

So what does this mean?  If a child, spouse or civil partner requires full-time care you could claim up to £1,500 per month for 12 months to help cover the costs of adjusting to your new family life or having to give up your full-time job.  You don’t actually even have to give up working if this does not suit you and your family.

To find out more about Income Protection and Family Carer Benefit call us now on 01636 870 069.

One for the guys

Men, did you know that you are more likely to be diagnosed with cancer rather than suffer a heart attack or stroke?  And did you know that prostate cancer is the most common form of cancer in men?

According to Cancer Research statistics in 2011 41,736 men were diagnosed with prostate cancer with 10,837 deaths in 2012.  http://www.cancerresearchuk.org/cancer-info/cancerstats/types/prostate/

Advances in treatments and early diagnoses has led to higher survival rates with 84% of men diagnosed between 2010-2011 predicted to survive for 10 years or more but what if the worse should happen?  Does your life insurance cover early diagnoses and low-grade cancers?

More and more frequently life insurance companies are recognising the importance of early diagnoses and tweaking their policies to reflect this and make themselves stand out.  A good example is Bright Grey who have just announced an adjustment to their critical illness policy to include low grade prostate cancer.

They have decided that they will pay out 20% of your cover (up to £15,000) should you be diagnosed with a specified stage of prostate cancer.  If later, things progress for the worse and you meet their full critical illness definition, they will then pay out the full amount of your cover.

If you would like to discuss life insurance in more detail, call one of our Advisers on 01636 870 069.

Extra protection for woman

According to Cancer Research the number of woman diagnosed with cancer has risen by 43% since 1970.  In light of this, Bright Grey has added 2 new early forms of female cancer to their list of additional conditions.

This means that should you be diagnosed with Carcinoma in-situ of the cervix uteri (requiring a hysterectomy), borderline ovarian tumour (requiring the removal of an ovary) or ductal carcinoma (an early form of breast cancer) Bright Grey will pay out 20% of your cover (maximum of £15,000).  Should this then lead on to a critical illness, as per their list, you will then receive the full amount of cover.

If you would like more information about critical illness and how it could protection you and your family, contact DALES on 01636 870 069.