Investors are reminded that the amount that can be invested into ISAs will go up in April this year.
Chancellor George Osborne may have made few changes to pensions in the latest Budget but the annual ISA allowance is set to rise to £11,280 from 6 April 2012.
HM Revenue and Customs made the announcement about changes to ISAs back in October last year.
Savers will be able to put up to £5,640 in a cash ISA, while the remainder of the £11,280 can be invested in a stocks and shares ISA.
Jason Witcombe, chartered financial planner at Evolve Financial Planning, claimed the new allowance amount is ‘generous’ and ‘valuable’.
‘It might mean starting off with a relatively small amount in ISAs but when people reach retirement, if they have a six-figure sum in an ISA portfolio that’s tax-free, they’re going to be patting themselves on the back for being so diligent when they were working.’
Witcombe argued that the recent raft of changes to pensions were not helping to encourage saving and that ISAs could be the answer.
He added, ‘ISAs are relatively easy to understand because, unlike pensions, you can get your money back and you don’t have to worry about working out tax relief. The way I look at it is saving for retirement is just as much about saving into ISAs as it is saving into pensions.’
Patrick Connolly, head of communications at financial adviser AWD Chase de Vere, recommends three funds for a stocks and shares ISA.
Cazenove Multi Manager Diversity
‘This is a defensively managed fund which is effectively a whole portfolio in one. It invests one-third in equities, one-third in cash and fixed interest and one-third in alternative investments such as property, structured products or commodities. The fund managers, Marcus Brookes and Robin McDonald, have been at the helm for nearly five years and while the fund performance is never going to “shoot the lights out”, they are building a consistent track record. The charges are also very competitive for a multi-manager fund.’
Investec Cautious Managed
‘This is a conservatively managed fund, which suits those looking for a degree of security. The fund manager Alastair Mundy has been at the helm for ten years and has established a strong reputation as a long-term investor, unearthing out-of-favour stocks and holding them until they recover. The fund typically invests about 50 per cent in equities and the same in fixed interest, although currently has 55 per cent in equities, reflecting the manager’s confidence. The fixed interest exposure is focused on sovereign debt and investment grade bonds, which have a low correlation to the stock markets.’
Old Mutual UK Select Smaller Companies
‘This is a high risk fund which adopts an aggressive approach, as demonstrated by the fund falling by 33 per cent in 2008, followed by rises of 39 per cent and 34 per cent in 2009 and 2010 respectively. Old Mutual has a well-regarded investment team and fund manager Daniel Nickols has a consistent record of outperformance. The fund manager believes there is currently huge value in smaller companies and that he is well positioned to benefit from this. This fund could produce very strong returns for those investors willing to accept the high levels of risk.’