Recent changes in the 2009 Budget
The chancellor has recently increased the amount that can be paid into an Individual Savings Account (ISA) each year from £7,200 to £10,200. This is good news for savers particularly during these times of paltry interest rates. Unfortunately the Treasury never makes this simple however and has decided to implement this increase in stages, which will work as follows:
From 6 October, those aged over 50 will enjoy the new ISA limit, but those under this age will have to wait till the following tax year before they can start to benefit.
The basic structure of ISA’s is being kept the same, namely
Option 1
- half the allowance is kept in cash
- half the allowance is invested into a stocks and shares vehicle
Option 2
- the whole £10,200 is invested into stocks and shares
What are ISA’s
An ISA is an advantages tax wrapper, with regard to stocks and shares ISA’s in simple terms all the capital growth and any income distributions within the plan are free of tax. Unfortunately, the additional tax advantage of the repayment of the tax paid on dividends, that the fund managers of ISA based funds were previously eligible to, is no longer available due to the removal of this tax break by the chancellor. With regard to cash ISA’s, simply all of the interest is tax free.It is a common misconception to mistake the tax efficiencies of an ISA wrapper with the performance of the underlying funds inside that wrapper. ISA’s are simply a vehicle for the underlying investment. It is of paramount importance to make sure that the underlying funds within the wrapper are of high quality. Major considerations are:
- Charges
- Quality and continuity of past performance
- Experience and track record of the fund managers responsible for the investment fund
At Accudo we can help you:
- Identify funds with solid and consistent performance
- Balance your PEP and ISA portfolio in such a way that the downside is minimised in the poor markets, while the upside is not too inhibited in the fair weather markets
- Monitor and maintain the performance and charges of the funds you are already invested in.
In the vast majority of cases we are remunerated by the 0.5% annual management charge levied by the fund providers from within their annual management charge, so it comes at no extra cost to the client.
So please give us a call for an unbiased evaluation of your PEP and ISA portfolio.
- Balance the asset allocation of your portfolio
- Ensure the diversification and risk levels of the investments within the fund are appropriate
In the hype of the late Ninety’s markets, many banks and building societies jumped on the bandwagon of fund management, enjoying the advantage of the ready made client base they had available, persuading many clients to invest into their own PEP and ISA plans managed by their own fund managers. Often this was done without properly explaining the levels of risk involved, nor is any performance comparison provided on an ongoing basis to show how these funds are performing compared to the market or sector to which they belong.
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