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What are investment ISAs?

If you want to build up your savings, a popular method is to open an Individual Savings Account, or ISA. There are two types – cash ISAs, and stocks and shares or investment ISAs.

Cash ISAs are simply accounts which allow tax free savings up to an annual allowance which, in the 2011-12 tax year, is £5,340. On the other hand, investment ISAs have a less certain outcome. This type of account allows you to invest in an assortment of trusts, bonds and funds – and, like all investments, they carry the risk of going down as well as up.

The 2011-12 tax allowance for stocks and shares ISAs is £10,680, double that of the cash savings account. If you invest in corporate bonds or other products that generate interest, you won’t have to pay interest. But you will still be liable for tax on unit trusts or OEICs unless you pay capital gains tax, or are a higher rate taxpayer.

There is a wide range of investment ISAs on the market, including these ones from Barclays and Standard Life.

  • Barclays Investment ISA – There are 23 funds to choose from in this product, including Barclays Income Plus Portfolio, Barclays Wealth Global Markets 1 to 5, BlackRock European Dynamic Fund, Fidelity Multi Asset Strategic Fund, JPM Emerging Markets, Jupiter Merlin Balanced Portfolio and Schroder Corporate Bond Fund. The minimum initial investment is a lump sum of £3,000. While unit trusts and OEICs are available in this ISA, shares are not. There are no dealing charges or annual fee.
  • Standard Life Investment ISA – With this product, you can choose from five managed portfolios with funds selected on your behalf, or you can opt for a 'self select' mix from 1,800 funds, including Aberdeen Emerging Markets, F&C Extra Income Bond 1, JPM Global Equity Income and M & G Optimal Income. The minimum first investment is £500, with subsequent investments of £250. Unit trusts, OEICs and investment trusts are all available, and there is no annual management charge or dealing charge.

 

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