Individual Savings Account

The launch of ISA in 1999 has brought consumers in the UK a favourable mode of savings and investment. Unlike its predecessors Personal Equity Plans (PEP) and Tax-Exempt Special Savings Account (TESSA), the purpose of introducing ISAs was to encourage consumers of different classes to deposit funds on banks where their ISA savings will contribute to the nation’s economic stability. An ISA allows savers to let their funds grow without being deducted by taxes.

ISA interest rates doesn’t have a standard rate because banks or building societies decide how much it should be. Cash access also vary since some ISAs have fixed-term, fixed rate and notice periods where your money should stay where it is upon the end term whereas some ISA polices offer savers an easy access to their money.

The basic types of ISAs are Cash ISA and Stocks and Shares ISAs. A person should be 16 years of age in order to open a Cash ISA while opening a Stocks and Shares ISA will require individuals to be 18 at least 18 years old. Also, for people who were born before April 5 1960, a sum of £10,200 is their ISA allowance annually and for people who are born after April 5 1960 has an ISA allowance of £7,200 but these sums is supposed to be raised to £10,200 by April 6 2010.

What’s with the April 5 and 6 you ask? These two dates are the start and end of each tax year. Furthermore, it is recommended that you make use of the allowance you get from your ISA prior to theending of the tax year otherwise you will lose it when a new tax year begins.

While the economy is still in a bad state, the base rate of the Bank of England has sunk to a mere 0.5% annually. So ISA shopping is one of the best move you can make so you can decide on an ISA rate that is much higher. Unfortunately, the slow economic recovery is further dragging down ISA interest rates to as low as 0.1% per year. To have a clearer picture of how low this rate is, multiply an amount by .001. At present, the highest interest rate you can acquire on an ISA is a maximum of 2.75%.

Other ISA arrangements can even offer higher annual rates of more than 3%. A five year fixed term for an ISA can provide as much as 4.6% every year and this type of ISA just like a time deposit. You should conscientiously think ahead of making a hefty deposit to this kind of ISA since you won’t be able to have access to it within the term.

If you already have an existing ISA account, other banks that offer a much higher ISA rate can relocate your ISA savings to theirs if you do an ISA transfer. But you should not pull out your ISA funds and close the account as this will not be passed over to the new provider you want to switch over. What you need to do is let your current provider transfer the account to the new one.

To save you the inconvenience of waiting in long lines, you should open an ISA savings account at the early possible time. A few weeks before the tax year ends, it has been proven that more people open ISA accounts than other time of the year. If you open an ISA in a much earlier date, you will earn money much sooner and you will also be spared from the hustle.