Confused about ISAs? Here’s 10 Facts You Need To Know

Credit crunch bites!

Individual Savings Accounts (ISAs) should be an integral part of your savings strategy, but there tends to be quite a bit of confusion about what they are and their benefits.

ISAs are not a savings or investment product in themselves, they’re a “wrapper” in which you can place savings or investments, in much the same way a pension is a wrapper for certain types of investment.  This wrapper gives the products inside the ISA its tax-free status – it’s possible to invest or save in similar products outside the ISA, but to be tax efficient you should only be doing this once you have used up your annual ISA allowance.

To confuse things further, there are various differences in the allowances depending on which of the 2 types of product (cash or equity) you decide to put in your ISA, and also depending on your age (although this will be made simpler from 6th April 2010 when all age groups will get the same allowance).

LoveMoney has some answers to 10 common ISA myths to help clear up some of the confusion.

Creative Commons License photo credit: Iain Farrell

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