Structured Income ISAs

What is a structured income ISA

A structured income ISA can allow you to use your annual ISA allowance to earn a regular income from your savings in a tax efficient way. Income can normally be taken on a monthly, quarterly, six-monthly or yearly basis.

With a standard structured ISA, you will normally be required to agree to lock your money away for a term of between 3 and 6 years. The level of return you see will then be linked to a particular index or indices, mostly commonly the FTSE 100.

This means that if the FTSE 100 is at a higher level when your ISA term ends than when it started, you will earn a return. However, if the index is at a lower level that when your ISA term began, you will either earn no interest or potentially even lose money, depending on exactly which type of ISA you have chosen.

A structured income ISA works in the same way, except that your interest is paid on a regular basis throughout the ISA term, rather than just at the end. This means the calculation of how much the FTSE 100 (or other relevant index) has moved is made on a more regular basis to facilitate those payments.

Types of structured income ISA

There are two main types of structured product you can consider investing your savings in. Which makes the most sense for you will likely depend on whether you are willing to risk your investment to potentially earn a higher return.

Structured deposits

If you want your ISA to be index linked, but don’t want to risk potentially losing money, a structured deposit ISA can be a good choice. With this type of product, the amount you earn in interest is still based on the FTSE 100 or an equivalent, but if that indexes value goes down over the term of your deposit, you simply earn no interest – your original deposit is always protected.

The downside to this is that the potential returns are lower than with a structured investment income ISA (see below), but this is a good option for those looking for a safer way to earn a return.

Structured investments

This type of product also offers index-linked interest payments, but with the caveat that your deposit is not protected. This means that if the index goes down, you can lose money on your original investment. However, the potential rewards are higher with structured investment ISAs generally paying higher rates of interest than structured deposit ISAs.

Compare structured income ISAs

There are a variety of different providers offering structured income ISAs and many different products with their own advantages and disadvantages. Choosing the right one for you can be tricky, which is why we keep the structured ISA comparison tool at the top of this page regularly updated with top deals from across the market. That way you can quickly see which products offers the best match for your saving goals and personal finances.