ISAs, or “Individual Savings Accounts,” are a form of savings solutions designed to help you save money without having to worry about taxes. There are many different types of ISA to choose from in the UK market, with new and innovative solutions emerging regularly.
Here, we’re going to look at some of the ISAs offered by building societies, banks, National and Savings investments, and beyond, to help you decide how you should use your money.
1. Cash ISAs
Cash ISAs are easily some of the most popular and simplest ISA options on the market. A cash ISA is a quick and simple way to save money, as you don’t have to pay income tax on the money that you earn. With a cash ISA, your money (up to a certain point), is covered by the Financial Services Compensation scheme too, which helps to keep you protected if the company goes bust. The only problem is that the interest rates on cash ISAs can be very low.
2. Stocks and Shares ISA
With stocks and shares ISAs, you’ll have the potential to earn much better returns on the money you save. Many stocks and shares ISA can deliver up to 7% annual return. However, there are fees to consider for the people who will be managing your money for you. The good news is that you can shop around for the best deal.
As with any stock or share investment, the amount of money you make can change rapidly. As such, stocks and shares ISA may not be ideal for people with a low appetite for risk.
3. Help to Buy ISAs
If you’re saving for something in particular, like a new home, then you may want a specific kind of ISA. A help to buy ISA is a great way to improve your chances of getting the home of your dreams because it helps you to boost the amount of money you have to spend on a deposit.
The Help to Buy ISA is supported by the UK government. When you save a certain amount for your home deposit, the government will give you 25% of that money as a bonus to what you can spend on your house. Just remember that the money needs to be for your mortgage deposit and nothing else.
4. Lifetime ISA
Similar to your Help to Buy ISA, a lifetime ISA, or “LISA” will give you a 25% boost on top of the money that you put in, to a maximum of around £1,000 per year. Unlike the Help to Buy ISA, the idea is to provide you with extra money either for your first home, or your retirement income.
The longer you keep adding money to your lifetime ISA, the more money you can potentially get from the government. Another point you’ll need to remember with a lifetime ISA is that there is a 25% charge if you decide to take out your cash before you turn 60, or for anything other than your first home purchase.
5. Litigation Funding ISA
A litigation funding ISA is a type of ISA that involves investing in the financial industry responsible for changing litigation around the world with a much-needed boost to ongoing legal cases. Legal cases are often funded in this way because litigants can’t afford to pay for the legal costs of their case. The litigation funding option gives investors a way to help individuals pursue justice and earn something back in the meantime.
Litigation funding is becoming a much more popular part of the UK landscape lately as people look for a way to invest their ISA money, without getting involved in somewhat riskier stocks and shares. Additionally, litigation has the potential to alter the justice environment for the better.
6. Junior ISAs
A Junior ISA is a fantastic product for people under the age of 18 who want to build up their savings for the future. In most cases, a legal guardian or parent will open a junior ISA on behalf of a child. Parents and guardians will be able to decide whether they would like stocks and shares to be part of the ISA, while the child will be able to take control of the ISA at 16.
Although a child can control the ISA at age 16, they won’t be able to withdraw their money until they turn 18. This is an excellent way for parents and guardians to get their children started on the savings ladder.