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ISAs Explained

How to get started with ISAs

ISAs are an excellent way to put money aside for the future while enjoying the advantage of tax-free interest. By familiarising yourself with the ins and outs of these tax-efficient savings and investment options, you can enjoy the full range of benefits available.

Selected ISAs

FTSE 100 UCITS ETF Tracker

from iShares

ISA Option
Allows ISA Transfers
Regular Savings
  • Fund Choice: Tracks FTSE 100 Index
  • Invest From: £50 pm
  • Investment Options: Provides exposure to the FTSE 100 index of the largest companies listed on the London Stock Exchange at a highly competitive price.

Available via Fidelity Fund Supermarket this is a super low cost FTSE 100 tracker with a 0.07% pa annual charge. The product has a record of tracking its benchmark to a high degree of accuracy and scored ahead of rivals on this measure. Income generated is reinvested.

The investment objective of the Fund is to deliver the net total return performance of the Benchmark Index (being the FTSE 100 Index), less the fees and expenses of the Fund. In order to achieve this investment objective, the investment policy of the Fund is to invest in a portfolio of equity securities that as far as possible and practicable consists of the component securities of the FTSE 100 Index, this Fund’s Benchmark Index. 

Please note the value of investments can go down as well as up so you may get back less than you invested. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

FTSE 250 UCITS ETF Tracker

from Vanguard

ISA Option
Allows ISA Transfers
Regular Savings
  • Fund Choice: Tracks FTSE 250 Index
  • Invest From: £50 pm
  • Investment Options: Tracks the FTSE 250 index of medium-sized companies, providing a greater UK domestic focus than the FTSE 100.

Available via Fidelity Fund Supermarket this product is among the lowest cost on the market. It comes from one the most established players. This is an ‘Accumulation’ product, meaning any income generated is reinvested.

This Fund seeks to track the performance of the Index, a widely recognised benchmark of mid cap sized companies of the United Kingdom. 

Please note the value of investments can go down as well as up so you may get back less than you invested. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

FTSE All-World UCITS ETF Tracker

from Vanguard

ISA Option
Allows ISA Transfers
Regular Savings
  • Fund Choice: Tracks FTSE All World Index
  • Invest From: £50 pm
  • Investment Options: Replicates returns from the FTSE All World, an index that encompasses both developed and emerging markets from around the world. Ranks among the cheapest products of its type. This is an ‘Accumulation’ product, meaning any income generated is reinvested.

Available via Fidelity Fund Supermarket this is a low cost tracker which provides global exposure with a annual management charge under 0.25% pa.This Fund seeks to provide long-term growth of capital by tracking the performance of the FTSE All-World Index, a market-capitalisation weighted index of common stocks of large and mid cap companies in developed and emerging countries. The Fund employs a “passive management” – or indexing – investment approach, through physical acquisition of securities, designed to track the performance of the Index, a free float adjusted market capitalisation weighted index. The Fund will invest in a portfolio of equity securities that so far as possible and practicable consists of a representative sample of the component securities of the Index.

Please note the value of investments can go down as well as up so you may get back less than you invested. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Investment Fund Supermarket ISAs

Stocks & Shares ISA

from Fidelity

Allows ISA Transfers
  • Protection Scheme: FSCS
  • Fund Choice: 2,000+ Funds
  • Invest From: £50pm

Why we like it: Invest from as little as £50 a month or with a £1,000 lump sum. Investment choice from over 100 fund providers, giving you access to 2,000+ funds. One low-cost service fee of 0.35%*. Great service – from investment guidance on website through to UK-based phones team. PathFinder, Select 50, Investment Finder - investing tools for beginners to advanced investors. 24/7 access via online Account Management system.

* depending on how much you have invested

Important: Please remember the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

Interative Investor Stocks & Shares ISA

from Interactive Investor

Allows ISA Transfers
  • Protection Scheme: FSCS
  • Fund Choice: 40,000+ UK and global investments
  • Invest From: £25 pm or £100 single

Why we like it: An award-winning ISA that gives you complete control. The second largest platform in the UK with the widest choice of investment options in the market including funds, investment trusts, ETF’s and more. Open online in less than 10 minutes. Access to expert independent ideas and analysis. Low cost fees and trading.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Investment Income Plan ISAs

FTSE Quarterly Contingent Income Plan

from Meteor

Allow ISA Transfers
Annual Income Up to 6.10%
  • Counterparty: Barclays Bank plc
  • Term: Up to 10 Years

With the current record low interest rate environment, income is high up on the agenda for many investors and so the ability to receive 6.1% per year even if the FTSE falls by up to 20%, is certainly worth a closer look.

Important: Structured investment plans are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment due to the performance of the underlying investment. There is also a risk that the company backing the plan known as the Counterparty may be unable to repay your initial investment and any returns stated.

  • Potential quarterly income: 1.525% (equivalent to 6.1% annually)
  • Income paid even if FTSE 100 falls by 20%
  • Potential to kick out quarterly from year 2 onwards
  • Available for ISA, ISA transfers and direct investments
  • Capital is at risk if the FTSE 100 Index has fallen by more than 35% at maturity from it's initial level, in which case your initial investment will reduce by 1% for each 1% fall
  • Minimum investment £5,000
  • An arrangement fee applies to this plan
  • If you withdraw your money during the plan you may get back less than you originally invested

Important Information: Structured investment plans are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment due to the performance of the underlying investment. There is also a risk that the company backing the plan known as the Counterparty may be unable to repay your initial investment and any returns stated.

Investment Growth Plan ISAs

FTSE 100 Enhanced Kick Out Plan

from Investec

Allow ISA Transfers
Maximum Potential Return 8.50% per annum
  • Counterparty: Investec Bank plc
  • Term: Up to 6 years

Kick out plans seem to attract particular interest when markets are repetitively flat since they can provide competitive returns even if the FTSE stays relatively flat with the potential for 8.5% annual growth.

Important: Structured investment plans are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment due to the performance of the underlying investment. There is also a risk that the company backing the plan known as the Counterparty may be unable to repay your initial investment and any returns stated.

  • 8.5% for each year (not compounded) provided the FTSE 100 finishes higher than its starting value (subject to averaging)
  • Potential to mature early, from year 1 onwards
  • Available for ISA, ISA transfer and direct investment
  • Capital is at risk if the FTSE 100 Index has fallen by more than 40% at maturity from it's initial level, in which case your initial investment will reduce by 1% for each 1% fall
  • Minimum investment £3,000
  • Product designed to be held for the full term

Important Information: Structured investment plans are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment due to the performance of the underlying investment. There is also a risk that the company backing the plan known as the Counterparty may be unable to repay your initial investment and any returns stated.

Junior ISAs

Junior Stocks & Shares ISA

from Fidelity

Regular Savings
  • Investment Options: Fidelity offer over 3000 Funds from over 70 Investment Companies.

Why we like it: You can tell Fidelity your risk preferences and they will suggest funds for you to consider for your child. You can also use their "Select 50" list of Fidelity's favourite funds. Alternatively If you want to look at all investment options you can use their poweful search tool. Fidelity have a low cost service fee that starts from 0.35% pa.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

ISAs Explained

Individual Savings Accounts (ISAs) are a way of saving and investing without paying any tax on the returns you make. ISAs were launched in the UK in 1999 to encourage people to save.

They allow you to earn interest on your savings without paying tax on it, and to invest in stocks and shares without being liable for tax on any returns you make.

ISAs were introduced to replace Personal Equity Plans (PEPs). Initially savers had the option of a mini ISA, which allowed investments in either cash or stocks and shares, or a maxi ISA, which combined both elements in one account.

The two current types of ISA , cash ISAs and stocks and shares ISAs, which replaced the mini and maxi ISAs in 2008. There are also innovative finance ISAs which involves lending to small business and the lifetime ISA which will be released in 2017. The lifetime ISA can help you save for a new home or your retirement and offers government bonuses to help you reach your goal.

What are the Benefits of an ISA?

For UK residents, ISAs are an excellent way of saving - in fact, they should be your first savings port of call in order to avoid paying tax unnecessarily on your investments.

  1. The primary benefit of ISAs is the tax advantage that allows individuals to profit from savings or shares without paying income or capital gains tax on that return
  2. The secondary benefit is that you are saving some of your income

Whether you've a particular savings goal in mind or you just want to ensure you've got an emergency fund tucked away, an ISA can provide a simple way to help achieve this.

There are many ISA’s to choose from so it’s easy to be left wondering which ISA is right for you. Comparison tables can be a great way to start. Follow the links provided to find more information on any of the products mentioned on our tables.

How do I Choose an ISA?

When choosing an ISA, there are a number of things to consider. We’ve highlighted some of the most important factors below:

  1. Timescale of your investment - If you need access to your money and you are not looking to invest for the long term you should consider a Cash ISA. Many of these are easy to manage and allow you to withdraw money at any point. However, if you are happy to tie up capital for the medium to longer term you may wish to consider a Stocks and Shares ISA which has the potential to provide better returns then a Cash ISA over the longer term
  2. Attitude to investment risk - If you are not prepared to lose money then a Cash ISA is probably the better option for you. It good to remember that, over the long term, inflation can erode your capital in real terms so getting a good rate of interest on your cash ISA should be a priority. If you are prepared to risk capital to achieve higher potential returns then a stocks and shares ISA may be the best option for you.
  3. Charges - Different ISA plans will have different charges. It is important that you are aware of what these are and how they could affect your ISA performance. These could be charges for transferring or closing an account early or a management charge which is applied to most stocks and shares ISAs. 

Which ISA is Right for You?

This depends on your savings goal and the amount or risk you’re willing to take. It’s generally advised that if you have debts, don’t have any other form of savings or will need to withdraw your cash in an emergency then you shouldn’t invest as your capital is at risk. It’s also difficult to withdraw your money quickly as you will need to sell your assets, even transferring can take 30 days or more.

If you do have some spare income, however, investing is a good way to see high returns on your money, as long as you are aware of the risks.

As another option, with certain types of Cash ISAs, you have instant access to your money, which makes it a flexible way to plan your finances. Alternatively, fixed rate ISAs are a good way to see guaranteed returns on your capital, if you can tie up your money for a year or more.

Is there a Charge for Transferring an ISA?

Your existing ISA manager cannot stop you transferring, but they may charge you for it. However, this is becoming less common, particularly with cash ISAs. You should contact your current ISA provider and confirm their policy on this before making a decision.

Are there any ISA Rules?

The rules on ISAs have been relaxed since April 2016 and you can now choose how you split your savings. While ISAs can be straight forward, there are some rules to follow and it’s useful to know before you get started:

  • Some accounts have penalties if you withdraw early, particularly fixed rate accounts. Be careful to check your provider’s rules as you could leave with less than you invested if you close early
  • You must use a transfer form if you want to transfer accounts. If you don’t follow the transfer procedure and simply withdraw the money yourself then you lose all tax benefits for that year
  • Transferring your ISAs should take no more than 15 days although transferring from a cash ISA to a stocks and shares ISA can take longer
  • You can’t have more than one account of the same type
  • ISAs are a good idea whatever your savings goal. With certain types of cash ISAs, you have instant access to your money, which makes it a flexible way to plan your finances. Otherwise you can potentially receive higher returns by tying up your money or investing.

It’s also important to remember that ISA allowance limits apply to everyone on an individual basis, so if you’re married or in a relationship, you can both hold your own ISA, each with the full allowance. This can make them an excellent way to save for large expenses such as a property, a holiday or a new car.

Types of ISAs

ISAs are available in two main types; within each type of ISA you can choose from a range of products to create a savings portfolio tailored to meet your needs. The two types of ISAs are:

  • Cash ISAs, which work like a regular savings account and feature the added benefit of tax-free interest.
  • Stocks and shares ISAs, which allow you to invest in funds, structured investments, or in the stock market. This extra risk can make for a potentially higher return.

Within the two types of ISA there are a range of options to choose from. For example, Cash ISA providers, such as banks and building societies, may offer both instant access and fixed-rate cash ISAs. This allows savers to select the product that best fits their requirements.

Stocks and shares ISAs can be invested into many different types of funds, structured investments, and directly into shares. This allows you to choose where you want to invest and how much risk you want to take with your money.

Important Risk Information:

This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.

Different types of investment carry different levels of risk and may not be suitable for all investors. Please ensure that you read the Important Risk Information for further details. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

High Income ISAs

High income ISA ideas:

ISAs Products

Cash ISAs

Fixed Rate & Instant Access ISAs:

Cash ISAs: 

Stocks & Shares ISAs

Types of Stocks and Shares ISA include: 

Stocks and Shares ISAs

Latest News

Investment ISA Pros and Cons

7th August 2020

The tax-free returns offered by an Investment ISA (otherwise known as a Stocks and Shares ISA) can be very tempting at first glance - however, as with any investment, it is important to weigh up the pros and cons. So we've put together a list of what you need to consider before opening your own Stocks and Shares ISA account. 

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