Member Article

Three questions to ask before investing in your ISA

As many start preparing for the new tax year, and people consider their ISA needs for the coming year, Paul Gilsenan, Principal of Paul Gilsenan Wealth Management, a partner practice of St. James’s Place Wealth Management, considers what to look for when deciding which account to open.

As the North East continues to shiver with the effects of the ‘beast from the east’ thoughts of spring and April can seem far away. In fact, the new tax year will soon be upon us and with it comes big decisions for every saver…the question on ISAs.

The market seems to be ever-growing, from those designed to help purchase homes to those that can help secure your child’s financial future. With so many options it can help to understand the best questions to ask to ensure you’re matched with a suitable product. Try these three simple queries:

What are you saving for?

It can seem an obvious one, but the biggest and most compelling question to ask when deciding on an ISA is what the saved funds will be used for. Is it a house? A retirement package? An emergency fund?

It can make all the difference.

For instance, packages such as the government-backed lifetime ISA can offer returns of 25% for up to £4,000 a year in savings but should only be considered for long-term plans as the returns only last until 50 and withdrawing money prior to 60 can leave you not only with no funds but having to pay penalties too.

**When do you need the money? **

Again, having a solid idea for what you’ll be using the money will give you an idea of when you will need access. As a general rule, the quicker you can theoretically access your funds, the lower the returns and, potentially, the higher the cost of withdrawl. Taking solid, professional advice can allow you to find an option that offers the best of both worlds, allowing for a solid ISA investment whilst maintaining enough ‘short term’ revenue to prevent you dipping into longer-term investments.

What are you investing in?

As well as cash options, stocks and shares have always been a popular option for those investing in ISAs. Add into the mix that you don’t pay capital gains tax on gains made within a stocks and shares ISA and, in a similar fashion, tax is also not paid on dividend income received from stocks and shares, making them a compelling option.

As with any aspect of your finances, investing for the best returns is a case of ensuring your portfolio is strong and being prepared for it to be long-term, much conventional wisdom suggests five years is the optimum length of time for investment. Whether saving for a specific purchase, investing in your retirement or simply looking to set something aside for a rainy day, ISAs can make a great choice, so long as you’ve planned wisely and made the most informed decisions.

This was posted in Bdaily's Members' News section by PSG Wealth Management Ltd .