The Government introduced ISAs as part of an initiative to get the general voting masses to save more money. However, true to the Government, something got lost along the way. Let me explain why...

The whole idea of an ISA is to invest money in a tax efficient environment, so that the growth is not eroded by HM Revenue’s taxation. However, if you are investing in a Stocks and Shares ISA in an equity based fund, there is not too much difference between this and investing in the same funds outside of this tax efficient wrapper, a Pooled Investment such as an Open Ended Investment Company or Unit Trust. Unless you are a higher rate tax payer, where you would escape the higher rate tax payable on dividend payments. The reason behind this is the annual Capital Gains Tax allowance. Each UK Resident individual has a Capital Gains Tax Allowance of £10,100 before there is any tax to pay and the rate of tax is 18%.

This is where the title comes in. Unless you are going to use this Capital Gains allowance, there is little added benefit from investing inside an ISA if you are investing in an equity based stocks and shares ISA. Considering an investment return of even 10%, you could invest £96,000 before Capital Gains Tax becomes an issue.

ISAs add value in the Cash and Fixed Interest asset classes. In these asset classes, the interest payments are made free from income tax. If you are investing in accumulation funds, i.e. where the interest is not paid out, there is a 20% credit on the interest element within the fund.

I think the overriding message here is that if you are looking at effective management of a lump sum, not only should you be thinking about correct Asset Allocation, but also the wrappers surrounding them should be considered. This is where Independent Financial Advice becomes invaluable.

What we do for our clients is to work out firstly what they are trying to achieve with their investments, and secondly the attitude to investment risk that they are looking to adopt when trying to reach a savings goal. That is the easy part, because when they leave our office, that is where the work begins. We take the information that was gathered from the meeting, and then analyse the data to ensure that the investment recommendation that we make is the best one to help our clients reach their financial goals.

Once we are happy with the recommendation we are going to make, we would then explain it. If at first a client doesn’t understand, we take the time to explain in a different way, sometimes breaking the information down further! We wouldn’t want anybody to sign forms for an investment that they don’t understand.

If this is would be first investment outside of Bank Deposits, we are able to hold your hand from start to finish, and this is where our excellent service really comes into its own. Not only will we assist you in setting up the investment, but we would review it with you to ensure that the plan we set is on course to hit its target.

Becoming a client of Forum Wealth Management is straight forward. The best way would to take advantage of a free initial consultation where you can talk to a qualified Independent Financial Adviser about your personal situation, and ask as many questions as you wish! Just call our switchboard to arrange a meeting.