Investment ISAs and How They Work

ISARetirement is something that all Brits should be concerned with. Having a strategy in place to help you retire comfortably should be a priority rather than relying on the State Pension system to take care of you. While it is possible to receive early retirement at age 55, most are finding that they need to work into their 60’s or 70’s in order to ensure that they retire comfortably. As you consider retirement options, researching those options, and then implementing a successful strategy is critical. Investment Savings Accounts (ISA’s) – whether of the cash or investment variety – are one of the most basic retirement vehicles available. Before getting started, it is wise to understand the difference between investment ISAs and a cash ISAs. Understanding how each account works can help you assess which account type best fits your investing strategy and retirement goals.

In contrast to cash ISAs, investment ISAs allow for the account holder to invest in stocks and other securities. For those investors who are seeking to purchase stocks, and along with their purchase, seize the potential to realize double-digit portfolio gains, an investment ISA is the more appropriate than simply using a cash ISA. Restrictions vary slightly as compared to a cash ISA, for example, in order to open an investment ISA, the account holder must be at least 18 years of age and be a UK resident. Annual contribution limits also apply, as they do with cash ISA accounts. Once those basic requirements are met, the account holder can start taking advantage of immense tax benefits. Keep in mind that there is no guarantee of gains, as well there is no protection against losses.

Open your investment ISA, and begin investing in stocks, bonds, and commodities. Profits made by investing in this type of retirement account are exempt from UK Income and Capital Gains Taxes. Buy and sell in your account without having to worry about tax consequences. This type of investing is very freeing, and this means that profits can be reinvested allowing your portfolio to increase exponentially. Before investing, be certain to determine your level of risk tolerance, as this will likely dictate the type of investments made in your account.

Keep in mind that there is no limit on the number of ISA’s that one citizen can hold. There is however, a limitation on the number of accounts that can be opened within a calendar year. Citizens of the UK have the ability to open one cash, as well as one investment account per year, and must stay within the annual contribution limits. The limits surrounding ISAs as well as specific tax protections afforded to account holders can change at any time and are set by the government. Remember that tax affairs can be particularly complex in some instances and therefore should not be considered lightly. Talk with a tax adviser before opening, or contributing to an ISA account.