How to set up a Stocks and Shares ISA
Deciding the best way to save your money can be a minefield. While it’s true that there are a huge number of options out there to choose from, how do you know which one is best for you?
Stocks and shares ISAs are a medium to long term savings option, with the added bonus of tax-free benefits and flexibility.
We’ve put together a quick guide to give you the run-down of how stocks and shares ISAs work, to help you consider whether they are the right option for you.
What is a stocks and shares ISA?
ISAs (Individual Savings Accounts) are a type of savings account that, unlike the majority of standard savings accounts, don’t require you to pay any tax on any of the hard-earned money you keep in them, meaning you’re getting the absolute most from your savings.
ISAs are a great way to save money over the medium-long term, and a stocks and shares ISA is a way to invest what you save with a view to benefiting from longer term growth.
Stocks and shares ISAs are available to anyone in the UK aged 18+, and are an ideal way to help with your financial goals, be that a new car, a holiday, or a little extra piece of mind for the future – whatever your financial plans may be, a stocks and shares ISA is a flexible way to watch your savings grow.
How does a stocks and shares ISA work?
If you are a UK resident aged 18 and over, you have access to an annual ISA allowance. For the 2021/22 tax year, this allowance is £20,000, meaning that you can invest some or all of this amount into a stocks and shares ISA, without paying any tax on the money you earn through your savings.
A stocks and shares ISA allows you to put your money into a range of different investment options, such as individual shares, investment funds, investment trusts and bonds. It depends on the provider you choose.
You won’t pay any income, dividends or capital gains tax on any of your earnings, and a stocks and shares ISA can give you an opportunity to see a better return on your savings over the long term, depending on the investment performance.
Our Stocks & Shares ISA, which is provided by Foresters Friendly Society, is fully protected by the Financial Services Compensation Scheme (FSCS), for added piece of mind.
What are the benefits of stocks and shares ISAs compared to cash ISAs?
A stocks and shares ISA can provide you with a longer-term financial gain, depending on investment performance, as unlike a Cash ISA, you are not just saving money but investing it in different asset types with a view to growing your savings over the longer term.
Cash ISAs are typically better suited for shorter term goals or for easy access to your cash should you need it in an emergency.
Stocks and shares ISAs are better suited for people planning their savings for the longer term – for example, those looking to save towards their retirement or to put some extra cash away to help their kids through university.
It’s also important to keep in mind that cash ISAs can be impacted by inflation. Keeping your money in a stocks and shares ISA over the longer term, while subject to investment performance which can go up or down, could help ride out any downturns, giving your hard-earned money the chance to grow.
How can I open a stocks and shares ISA?
Opening a stocks and shares ISA is simple. Our Stocks & Shares ISA is provided by Foresters Friendly Society and can be opened by investing an initial lump sum, transferring your funds from an existing ISA or by setting up a monthly direct debit.
You could save up to £20,000 in the 2021/2022 tax year through regular savings from just £50 per month. Any lump sums you choose to invest can start from £500, with top ups throughout the year of at least £250.
How much you choose to invest is up to you, but it is important to make sure you are happy to put the money into savings over the long-term. Ideally, this would be a period of five years or over, allowing your savings time to grow.
Can I have more than one stocks and shares ISA?
You can only pay into one stocks and shares ISA each tax year, although you can open another stocks and shares ISA with a different provider in the next tax year. However, you are not able to pay into both stocks and shares ISAs during the same year and any unused ISA allowance cannot be carried over.
Can I have a stocks and shares ISA and a cash ISA?
If you’re looking for different ways to save, good news! You can have more than one ISA at the same time as long as they are different types e.g. a cash ISA and a stocks and shares ISA.
It’s important to be aware that you still cannot exceed your annual ISA allowance of £20,000, however you can split your allowance across the two types however you like.
What are the rules for transferring a stocks and shares ISA?
Not all providers will allow you to transfer your funds from one ISA provider to another, so it’s always best to check first.
Any money you have held in a cash ISA can be transferred over to another cash ISA, or into a stocks and shares ISA.
Any assets held in a stocks and shares ISA can also be moved into the same ISA type with another provider or into a cash ISA.
Transferring your money as opposed to withdrawing and reinvesting your cash, allows you to continue to benefit from the tax-free advantages of your ISA.
The POIS stocks and shares ISA
If you’re looking for all the benefits that come with a stocks and shares ISA, with flexible saving options and transfers accepted, look no further than the POIS Stocks and Shares ISA.
So why us? A POIS Stocks and Shares ISA:
- Is suitable for medium to long-term saving
- Is available to all UK residents ages 18 to 80
- Has the potential to grow thanks to annual and final bonuses
- Is invested in Foresters Friendly Society’s With Profits fund, which consistently performs well vs other comparable funds. (Source: Barnett Waddingham survey, Dec 2019)
- Allows you access to membership benefits such as discretionary grants
With additional coverage provided by the Financial Services Compensation Scheme (FSCS), you can rest assured your money is in the best possible hands.
If you’re considering setting up a stocks and shares ISA, or you’d like more information about the options available to you, please get in touch with our team.
It’s important to remember that you may get back less than you have paid in. Tax rules might change and depend on individual circumstances. Bonuses are not guaranteed and depend on the performance of the Foresters Order Insurance Fund and how we decide to distribute any profits. Member benefits are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.
The content of this article is for information purposes only and does not constitute financial advice. We do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Financial Adviser. You may have to pay for this advice.