The Individual Savings Account or “ISA” is a kind of savings solution that most people have heard of, but few understand how to use to their advantage. If you haven’t put a lot of thought into your savings and retirement strategies before today, then there’s a good chance that you only thought there was one or two kinds of ISA available for the average saver. However, the truth is that there are many different options to choose from, each with their own unique strengths and weaknesses.
Today, we’re going to look at some of the ISA accounts that you should think about investing in – even if you’ve never heard of them before.
1. The Inheritance ISAs
An inheritance ISA is designed for people who want to leave their loved ones with a pool of money that they can tap into after their death. This ISA is typically available for anyone who has lost someone in their life since December 2014, and it involves moving the value of the ISA that the person held at the time when they died to your own ISA allowance.
While this might seem like a strange option for savers, the truth is that it’s actually a great way to save some money on your inheritance, because you can bring the cash into your ISA account without facing tax charges.
2. An Innovative Finance ISAs
These days, it seems as though new savings opportunities and financial concepts are appearing on the market almost every day. The government has begun to recognise the appeal of these saving options, which include things like crowd-funding services and peer-to-peer loans, which is why they created the innovative finance ISA.
When you invest in an innovative finance ISA, you can take part in peer-to-peer lending and crowd funding initiatives, without having to worry about paying any taxes on the returns from these deals. The limit for earnings is the same as a standard ISA (£20,000). Because of the nature of the investments that are made in an “innovative finance” ISA, many people regard these options as similar to the “Stocks and Shares” ISA.
3. Litigation Funding ISAs
Another innovative ISA option for forward-thinking savers is the Litigation funding ISA. This ISA works by allowing individuals to invest in the justice system, boosting the financial support available for legal cases. Litigation funding ISAs have become critical to people who can’t afford to pay for the legal costs of their case alone. With litigation funding, investors can help individuals pursue crucial cases, while still earning money back in the long-term.
Litigation funding is one of the most risk-free ways to invest money as part of an ISA strategy. It’s much more reliable than a stocks and shares ISA, and you get the benefit of knowing that you’ve helped someone in your community.
4. Help to Buy ISAss
Certain ISA options are designed specifically to help people save for something crucial in their lives, like a new home. If you’re saving for your first property, and you want to make sure that you have enough to make a hefty deposit, then it’s a good idea to sign up for a help-to-buy ISA. Help to buy ISAs are offered through a UK government scheme designed to help young homebuyers take their first step on the property ladder.
Whenever you save into your ISA before you buy your new home, the government will pay back 25% of your total, which significantly increases the amount you can put towards your property. Importantly, the only way you can use a Help to Buy ISA is on a home deposit, so this isn’t the best option for someone who merely wants a saving fund. If you’re looking to make an alternative long-term purchase, consider a LISA (lifetime ISA) instead.
5. Stocks and Shares ISAs
Finally, stocks and shares ISAs are some of the riskiest savings solutions in the financial market, but they’re also a great way to get a good return on your cash. With a stocks and shares ISA, you invest the money you save into the securities available on the trading market. In some cases, your ISA can deliver an up to 7% return on your investment.
However, when you invest in stocks and shares ISAs, you’ll also need to pay brokerage fees to the company responsible for managing and investing your cash. Additionally, there’s always a chance that you could lose some of the money you spend on shares.