Are ISAs still relevant?
Individual Savings Accounts are 20 years old this year - happy birthday to you, ISA!
But, does the introduction of the tax-free personal savings allowance (PSA) in 2016 mean that ISAs are irrelevant as they now aren’t the only place that you can save tax-free? The PSA is where savers can earn a tax-free £1,000 of interest as a basic-rate (20%) taxpayer or £500 as a higher-rate (40%) taxpayer. This means that standard savings accounts and ISAs are now on a level playing field when it comes to tax on interest earned.
Are ISAs still relevant?
We think so with the introduction of accounts such as the Lifetime ISA but it can of course depend on the interest rate and other benefits that you would like to achieve with your savings account. We have recently launched our Lifetime ISA online and are the only financial service provider where you can open a Lifetime ISA in a branch and online. The Lifetime ISA is a Government scheme where accounts can be opened with £10 and gives savers aged 18-39 a 25% bonus* on whatever they save, up to the amount of £4,000 a year, with the maximum yearly bonus being £1,000. The saving goals for the Lifetime ISA are only buying a first home or retirement where you can access the savings, bonus and interest that you have saved and earned at age 60. The Lifetime ISA account remains open after the savings have been used for buying a first home and the member can still earn up to £1,000 a year after this life event for their retirement.
With the Lifetime ISA, our account holders will also be eligible for our Member Rewards loyalty programme, which includes benefits such as exclusive access to independent financial planning and cashback on home insurance; as well as fee-free access to Nottingham Mortgage Services, our broker service who could search over 50 lenders to find the right mortgage for our first time buyer Lifetime ISA members. This can cost up to £249 for non-members.
Could it be time to take advantage of your yearly ISA allowance and protect your savings and investments from tax? ISAs are also definitely relevant if you are a higher-rate taxpayer or you are planning to become one in the future. ISAs are also beneficial in the fact that they can be inherited with some providers. When your spouse or civil partner passes away, you can inherit their ISA allowance that they had built up and benefit from the tax-free interest.
There are a number of ISAs on the market but here at The Nottingham, we have, amongst others, a Lifetime ISA, a Help to Buy: ISA, an Easy Access ISA Issue 4, Fixed Rates ISAs and a Junior ISA. You can find all of the interest rates and further information for these accounts here.
*The maximum you can save each tax year is £4,000. The Government will pay a 25% bonus of up to £1,000 each tax year. You can withdraw money from a Lifetime ISA to buy your first home, or at age 60. Other withdrawals will usually mean a 25% Government charge, so you could get back less than you put in. Full terms and conditions are available at thenottingham.com.
Whole of market mortgage advice is provided by Nottingham Mortgage Services Ltd; an appointed representative of Intrinsic Mortgage Planning Ltd, which is authorised and regulated by the Financial Conduct Authority; (see the FCA register at register.fca.org.uk, reference No. 440718).Nottingham Mortgage Services Ltd is a wholly owned subsidiary of Nottingham Building Society and registered in England and Wales, No. 03089887. Registered address: Nottingham House, 3 Fulforth Street, Nottingham NG1 3DL.