ISA Season Dos and Don'ts
ISA season is upon us - in case you hadn't noticed - and as savers, it can start to feel like every bank in the land is flinging attractive-sounding deals into our path.
To help you navigate the run up to the ISA deadline on 5th April, we've come up with some essential Dos and Don'ts to keep you and your savings on the right track.
- Take the time to research your ISA options before you commit - there are many factors you need to consider before opening an ISA, so don't let the fact that the deadline is looming lead you to neglect this vital step. Take into account things such as how likely you are to need fast access to your money, the length of time you can commit to investing, your short and long-term savings goals, and how comfortable you are with risk.
- Shop around to get the best deal possible - interest rates might be low across the board right now, but that's no reason not to go for the best deal you can find, even if it's just for a standard cash ISA. Investigate alternatives such as e-ISAs, which are run online and therefore tend to offer higher rates than standard instant access cash ISAs due to lower administration costs.
- Make sure you handle any transfers properly - you may have an existing ISA that you'd like to transfer before the deadline in order to take advantage of a last-minute deal. If this is the case, you need to make sure that you organise the transfer properly by speaking to your chosen ISA manager, who will arrange the process for you. Additionally, if you're transferring funds in or out of an investment ISA, check for any charges you might incur in doing so.
- Whatever you do, never withdraw cash from an existing ISA if you're planning to put it into another ISA, as you'll lose your associated tax benefits and it will count as part of your allowance, limiting the amount you can subsequently deposit.
- Stick rigidly with what you think you know about locking your savings away - this used to be the standard strategy for long-term cash savers, back in the days when a fixed-rate bond generally equalled a better interest rate, but it's no longer necessarily the best way to use your ISA allowance in light of the current interest rate situation. If you've got cash to tie up and you're prepared to accept some risk, a structured deposit plan might be a good choice because they provide the potential for stock market-linked returns while your capital remains protected.
- Go for the first decent offer you see - this makes you every ISA manager's dream customer. You're attracted to a competitive rate for new customers, you deposit your money, and you receive a decent rate of interest for the introductory period. The rate then plummets once this time is up, and the ISA provider, at this point, will be fervently hoping that you a) forget; or b) can't be bothered to move your money to a provider offering a more competitive rate. And in this respect, ISA managers are usually right! By being more proactive than the average saver, you can maximise your rates all year round and stay one step ahead of the taxman.
- Assume that because the deadline is 5th April, you don't need to do anything until 4th April - at which point you can grab the phone or dash into the bank and set up an ISA in minutes. This isn't always the case - many providers close popular deals early if they become over-subscribed. Even if your chosen deal doesn't have a fixed quota, your provider may still require cleared funds before the final ISA deadline, so check!
Finally, don't panic if you're not sure what to do - ISA.co.uk lists some of the most competitive deals on the market, so keep an eye on our ISA tables to make sure you're one of the first to know about the latest rates.