Choosing the best investment ISAs

If you want to protect your savings from the taxman, you might want to consider an investment ISA.

These individual savings accounts allow people to save thousands of pounds each year without having to pay tax on the interest or dividends earned.

For the 2011-12 tax year, for example, you can save up to £10,680 in an investment ISA tax free.

Because this type of ISA tends to involve stocks and shares, funds, gilts and bonds, it can be rather risky and savers should bear in mind that their investments could go down as well as up.

That’s why some people use a professional adviser to operate the ISA on their behalf – but others prefer to manage their own investments. It all depends on how experienced - and confident - you are in investing.

Two of the best investment ISAs we found on the market are offered by the Alliance Trust Savings and TD Waterhouse.

The Alliance Trust Savings Stocks and Shares ISA has more than 1,400 funds to choose from, including UK and international stocks and shares, fixed interest securities, trusts and gilts. It has no set-up fee and investors are allowed one online trade free of charge - they normally cost in the region of £12.50. The administration fee is reasonably set at £25, plus VAT, per year.

The TD Waterhouse Trading ISA has 1,800 funds on offer, allowing savers to pick their own mix of stocks, shares, bonds, OEICs, gilts and exchange traded funds. If your balance is £5,100 or more, you could qualify for a free administration fee, which otherwise costs around £30 plus VAT. The flat rate for each online trade starts from £8.95.

If you have an independent financial adviser, it's worth asking him or her to help you choose the best investment ISAs to suit your individual needs.



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