I hope you found Part 1 helpful and welcome to Part 2 of ‘How to get the best ISA’. I will be continuing on from where I left off in the previous post and will also expand some previously mentioned topics. To start with I will give you some pointers regarding ‘Fund ISAs’. These are trickier than your regular ISAs and require you to be a lot more attentive to them. To surmise you want to pick funds that deliver higher returns for lower risks (but additionally carry lower charges). For the 2008/2009 year you are able to invest £7,200 into your ISA and up to £3,600 can be in cash but alternatively you could invest the total amount into stocks and shares. You can get advice from independent financial advisors who will help you to pick stocks and shares but you will pay higher charges for this. Experts have stated that novice investors should start with index trackers, low cost funds that mirror the stock market or global investment trusts. Now on to the ‘Cash ISAs’, the following are my own pick of the crop and have served me fairly well. So first to be billed is the top-paying mini-cash ISA from Alliance & Leicester returned £3,250.58 on an original deposit of £3,000, comparable to a compound interest rate of 8.35% over the tax year 2007/08. It was released in the run-up to last year's ISA deadline, existing customers were barred from the account however, while new A&L customers had to open a Premier current account to be able to gain access to the ISA. Another caveat is that the rate came with a guarantee to pay Bank of England base rate - currently 5.25% - plus 1% until the end of this month. It will then fall to base rate less 0.25%, leaving savers with a marginal rate of 5%. Existing customers should take their £250 and run. The second best-paying ISA, from Abbey, netted savers £3,245.42 on a £3,000 deposit, equivalent to a rate of 8.18%. However, savers had to invest an equal amount into a guaranteed growth bond to access this ISA, which means you would have to halve your ISA investment or double the overall amount of money invested with the bank. Unlike the catches of the top two ISAs, savers looking for a straight-forward, no-frills cash ISA that still paid a great rate found it with the Barclays Tax Beater ISA. Savers received £204.23 on their deposit of £3,000, but it wasn't as simple as that. It was billed as the 'best no-catches cash ISA rate to hit the High Street this year', however as a result of bungling by the bank, many ISAs were not set up in time before the ISA deadline last year for investors to take advantage of their annual 'use it or lose it' tax allowance. I believe Barclays has followed up with an equally impressive proposition this year. Barclays has continued its strategy of offering a competitive tax free savings account, with its Tax Haven ISA paying 6.31% gross, or 6.5% AER when you take into account the monthly interest. If last year is anything to go by, this deal may not be on the shelves for too long. The original Tax Beater ISA was withdrawn from sale in the middle of May last year because Barclays admitted that it was experiencing problems processing applications. If the bank's administration comes under strain again this year, perhaps would be best to transfer your funds over as soon as possible. The other ISA providers worthy of mention – which were all straightforward in comparison to those mentioned above included those from (in descending order) National Counties Building Society, Bradford & Bingley, Scarborough Building Society, National Savings & Investments, Northern Rock, Egg and Kent Reliance Building Society. Tune in for the final instalment of ‘How to get the best ISA’. |