You only have until midnight on 5 April to use your ISA allowance, but there is still plenty of time to ensure your savings are working as hard as they possibly can. Here are our 10 top tips for maximising your ISA
Know the 5 Common ISA Mistakes in order to get the most from your £15,000 annual allowance before the April 5th cut-off.
The findaWEALTHMANAGER.com team has compiled some of the pitfalls that last-minute investors may encounter – all of which can be easily avoided through careful planning and research or doing away with ISA deadline stresses by using a professional to manage your wealth.
Lee Goggin, co-founder of findaWEALTHMANAGER.com, says: Trends come and go in investing and it’s all too easy to get carried away by one, particularly if you are hurrying to invest before the ISA deadline. The tech sector provides ample examples of stocks that ultimately failed to live up to the hype. Big data AIM stock WANdisco was hot property when it IPO’d in June 2012 and was still riding high during the 2013 ISA season. Two years later it’s a different story. Investors who bought at IPO would have been sitting on losses of almost 6% in early March and the business is yet to turn a profit.
A current sector for hot money is Indian equities, where cash has been flooding in on the back of stunning stock market gains last year. You can see DIY investors jumping onto this particular bandwagon this ISA season, even though it’s unlikely the performance will be repeated in 2015.
Investors should take a step back before piling into the latest trend, consider the risks and remember that past performance is just that – in the past. Rather than being lured by a fad, think about diversifying into different investments. Alternatively, you could use a wealth manager to construct and manage a portfolio based on your individual risk profile and investment goals. A good wealth manager certainly won’t invest in a tech wonder stock on a whim; they’ll sensibly add to a portfolio in a way that maintains the appropriate balance of asset classes. Many users of findaWEALTHMANAGER.com say the fees they pay are more than justified by the investment performance and peace of mind gained from using a professional.”
Says Mr Goggin: Last-minuters’ tend not to have time to do proper research and can often end-up plumping for the safe option of a cash ISA, which in all likelihood will be paying a paltry rate. While they can always transfer into an investment ISA later, many people will simply forget about it until next ISA season!
There is always a scramble for people to use up their ISA allowances as the end of the tax year approaches, so if you have not used yours yet you should make doing so a priority. But that should not mean rushing in panic for a poor retail offering. Take a more considered approach to how you use ISAs and spend some time researching the best options. For some, engaging a wealth manager to help you get the most out of these tax-wrappers could be an incredibly shrewd move.
Says Mr Goggin: Some people who are in a position to use up their ISA allowance may not because the deadline simply passes them by. ISAs provide attractive tax breaks and anyone who has the funds should use their allowance, particularly as other savings vehicles such as pensions are becoming less generous.
Get organised. Put a note in your calendar or on your smart phone. We all lead busy lives but it doesn’t take much effort to use your ISA allowance, particularly because so many services are available online now. If doing it yourself is not practical, a professional money manager will certainly not allow the ISA deadline to slip by without investing your allowance.
Says Mr Goggin: Most savers look for the best cash ISA rates each year and this means they often end up with numerous different accounts. These can be hard to keep track of and savers’ money may end-up languishing in accounts paying very low interest after teaser rates have expired. Likewise, when it comes to stocks and share ISAs, there’s now a proliferation of DIY investing platforms and services, each with their own USPs, many of them trying to get your money through short-term special offers and incentives to transfer portfolios to them. It’s not uncommon to have an ISA with one platform, a SIPP with another and a share trading account with a third provider – and some investors have many more than that, with legacy accounts stretching back years across numerous providers.
All this means it can be difficult to keep a handle on asset allocation, fees, interest rates and overall performance, which means your money is unlikely to be working as hard for you as it could be.
For anyone with numerous accounts and providers, the prospect of reviewing and consolidating them can be extremely daunting and all-too-easily put-off for another day. However, the benefits of doing so are many. Being able to view your ISAs as a single portfolio allows asset allocation and performance to be more efficiently monitored and managed.
For those who have built-up larger investment pots, proper investment management may become more attractive. A wealth manager will invest according to your individual risk profile and you will be able to have all your portfolios managed cohesively and in line with your investment goals. Investors can also take advantage of other services, such as tax planning, which can become more important as portfolios grow.
Says Mr Goggin: Many people forget that they can invest on their children’s behalf with a junior ISA, particularly if they’re hurrying to use their own ISA allowance. The Junior ISA investment limit is £4,000, which means a family of two adults and two children could save £38,000 a year tax-free – an opportunity that should not be missed.
Any parent knows that it’s usually difficult to ignore your kids, even if you’d dearly like to sometimes. But when it comes to savings, always try to remember that the £4,000 annual Junior ISA limit can grow into a considerable and very useful investment pot over 18 years, handy for paying university fees or as a deposit on a first property. Using a professional will mean your child’s JISA allowance is not overlooked and help ensure you get the best investment performance from it.
If you haven’t considered using a wealth manager before – or if you haven’t reviewed your existing manager to check their competitiveness and suitability try our smart online tool. Or, if you would like to discuss your situation with our straight-talking team, please do get in touch here.