AXA Self Investor
Updated: Fri, 15 Mar 2013 17:00:00 GMT | By Lovemoney

The best ISAs for 2013

Have you opened an ISA yet for this tax year? The deadline is April 5th, so you don’t have long to shelter up to £11,280 from the tax man.

The ISA deadline is 5 April [image © Rex]

ISAs are a fantastic tax break so if you have any spare savings, it makes  a lot of sense to open one. Before we look at the best ISAs on the market right now, let’s just do a quick recap of the rules.

There are two types of ISA: Cash ISAs and Stocks and Shares ISAs. Cash ISAs are effectively tax-free savings accounts; stocks and shares Isas are tax-free wrappers in which you can place investment funds, individual shares, bonds and a few other investment products.

In the current tax year, the maximum investment in a cash ISA is £5,640. If you don’t open a cash ISA, you can invest up to £11,280 in a stocks and shares ISA.

If you’ve already opened a cash ISA, take the total amount you’ve placed in the Cash ISA and subtract that from £11,280. That gives you the amount you can invest in a Stocks and Shares ISA this year. So if you’ve invested £4000 in a Cash ISA, you can invest up to £7,280 in a stocks and shares ISA.

These allowances are pretty generous. Especially for stocks and shares.

Stocks & Shares

Indeed if you have some spare cash that you won’t need for a while, we’d urge you to think seriously about opening a stocks and shares ISA.

That’s partly because the interest rates on cash ISAs are disappointing at the moment. Indeed rates are low on pretty much all savings accounts, and sadly it doesn’t look like things are going to get better any time soon.

The other important issue is that even in periods when savings accounts are paying higher rates of interest, stocks and shares still tend to perform better over the long term – five years or longer.

Obviously, there are no guarantees with the stock market, but all the historical evidence suggests that the longer you stay invested, the lower the risk that you’re taking.

Index trackers

So which stocks and shares ISAs should you go for?

First, it’s worth remembering that the ISA itself is a wrapper. So you can get an ISA from a provider and you can then pick investments to go within that ISA wrapper.

There are plenty of good companies offering stocks & shares ISA wrappers, but we’ll highlight three of the best known:  the Fidelity stocks & shares ISA, the Hargreaves Landsdown stocks & shares ISA, and Alliance Trust Savings. Fidelity is especially attractive at the moment because it’s offering a 50% discount on charges for the first year you have the ISA, as long as you open your ISA by April 5th.

Once you’ve got your ISA wrapper, you have to decide what investments to put in it.

The simplest option is to go for an index tracker fund. These are funds that invest in all the companies in a particular stock market index. So if you put money into a FTSE-100 tracker, you’d effectively be buying shares in all the companies in the FTSE-100 index – the hundred largest companies on the London stock market.

We like index trackers because the charges are low and they often perform better than other types of fund which have higher charges.

The Fidelity Moneybuilder UK index fund is one of the best UK index tracker funds, it tracks the FTSE All-share index which comprises around 630 companies. The charges are nice and low at 0.3% a year, and you can invest in the fund through a Fidelity Stocks & Shares ISA.

And if you want to be more adventurous, you don’t have to stick with the Fidelity UK index fund. There are 1200 other funds you could choose to put in the Fidelity stocks and shares ISA, and a similar range if you go for an ISA from Hargreaves Lansdown or several other providers.

Cash ISAs

Although we’re big fans of stocks & shares ISAs, we know that cash ISAs have their place. Some people don’t want to take much risk, or they’re too old  to take much risk, or they may know that they’ll need the money for something else in the next two or three years.

So here’s a quick look at the best cash ISAs on the market right now.

Over the long-term, the Halifax 5-year ISA Saver account is offering 3.1% a year in interest while the 3-year version of the same account is paying 3%.

The Santander 123 Exclusive Major ISA also isn’t bad as it’s paying 3% a year for a 2-year bond. However, you have to be an existing Santander customer to be eligible. If you’re not an existing Santander customer, you can get 2.8% a year.

There’s also a 0.1% bonus if the golfer, Rory McIlroy wins one of the big golf ‘major’ tournaments during the two-year period.

Moving onto instant-access ISAs, you can get 2.5% a year with the Direct ISA saver account from Santander.

Peer to Peer

Finally, don’t forget about the peer-to-peer lending sites where you can earn as much as 5.8% a year on your savings. Granted, you’ll have to pay tax on the interest – unlike with a Cash ISA – but on the plus side, you’ll get a much better return than you’d get from a Cash ISA or a conventional savings account.

18/03/2013 06:51

The current ISA savings plan is a joke for for "OLDIES" - cash ISAS are not much better than some savings accounts,while stock/shares are too risky for we older people.

Over 65s should have preferential treatment on savings etc- I have worked and paid tax/NIs for 40 yrs




18/03/2013 08:45
Why bother saving? If you bung some money away for a rainy day now, and collect it, plus interest in twenty years time. It's actual value, in terms of what you can buy with it will not have increased.  My first house cost £12,000, when I sold it 28 years later that increase in the amount of pound notes would only have bought me exactly what the original amount would. So that's exactly what happens with your tenner, Nothing, you just need more of them for the same thing.  That's the way the system is designed, to keep you and all the other wage slaves down where you are.
After what happened in Cyprus i don't think opening another bank account makes sense at the moment. 
18/03/2013 10:01
This Government and ALL the others say save for your old age again I have save and was paying income tax on my works pension now they say with my new tax cord I have to pay a lot more I would not advise any young to save put it in a account where you can get at it not a company one as all Governments will know what you have and add it to you tax bill I might as well of spent it when I was young and the rely on the state to keep me just like a lot more do 
18/03/2013 09:55

Possibly I'm too trusting but I can't ever see a repeat in Britain of the Cyprus savings plundering - it would be the immediate death of that political party and as a bigger economy we must have more options than little Cyprus surely. Having said that, what can you do? We are supposed to save for our retirement, old age, unforeseen circumstances and security etc but savings lose value, rates are hopeless and the temptation to live for the present and to hell with the future is always hovering.

I can't help wondering if Cypriot bankers got bonuses and where Cypriot politicians keep their savings.....

18/03/2013 18:15
if everybody wants to know were all our money is going you need to start reading up on the banking families that are stealing all the wealth of all the countries around the world for themselves ? look up the bilderberger group for a start . also look up the new world order i promise you will be shocked by what you learn . these people are pure evil and should be stopped .
18/03/2013 12:08
Nat West have just reduced the interest on my Cash ISA Plus for the second time. I have a Cash ISA taken out last year paying 3% coming to an end in April. Do you think Nat West will let me transfer it to my existing Cash ISA Plus - like hell.
18/03/2013 11:16
offshores...................................... they are the safest option, because while we have greedy politicians they will have their money there, I do not believe that our millionaires are declaring all their profit and paying 50% for the public fund.
18/03/2013 18:18
put it under your matress   F U K the bank's
18/03/2013 11:17
they all do that, but if one of us workers try it, they immediately change the rules and finish the offshores.
27/03/2013 11:46
save like mad so that Cameron and his millionaire mates can live in the comfort that he thinks is his right just like his predecessor sailor boy Ted Heath  that took us into the EEC saying it was for our own good and we were to thick or illiterate to comprehend so he would make the decision for us and now we are governed from Brussels and ripped off and dictated to by the Germans  the French not to mention the illegal's with more civil rights than the natives of this country which incidentally we are now the minority that do not have any rights. We work all our life save so that we can be comfortable in our retirement only to be screwed by Cameron and his kind under the guise of taxes, Cyprus is a good example of how the big boys trample on the weak and make out it is for the better.
20/03/2013 03:28
3% on a 123 account, upto 20k, good for a cheque account
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