S3 Ep3: It’s an ISA

In episode 3 of ‘Practical Financial Planning’ (the third season of the ‘Where Your Treasure Is…’ podcast), Simon and Bex explore the whys and wherefores of considering an ISA, (Individual Savings Account) as an investment option.

The following points are among those covered by Simon and Bex in their discussion:

• Simon explains that investment vehicles are ‘containers’ that have been created to ‘carry’ money in order to help investors gain positive returns on their money. [00:44]
• Two of the best known investment vehicles are pensions and ISAs (Individual Savings Accounts). Each of these can create benefits for an investor, especially as a result of the special tax arrangements that are a key aspect of how they each operate. [01:59]
• Pensions and ISAs have been deliberately created as tax efficient products, which means that they assist investors to grow their money by avoiding certain taxes which would otherwise apply to their savings. (Simon stresses that these arrangements are completely different from tax evasion, which is unequivocally illegal!) [03:43]
• Bex and Simon summarise the different tax arrangements for pensions and ISAs. [06:12]
• When considering whether a pension or an ISA is better for you, two key factors should be taken into account: (1) your objectives (2) the tax arrangements relevant to your situation. First of all, Simon examines the possible tax permutations. [06:56]
• The objectives of the investment are then considered, with Simon explaining that an ISA can be a great way to save for a deposit on a house, for example, while the primary purpose of a pension is to provide an income during retirement. [12:38]
• The LISA (Lifetime ISA) is highlighted as a particular kind of ISA that potentially has real benefits for anyone looking to use it to buy a first home. As long as the specific rules governing the LISA are followed, investors stand to gain from a 25% bonus that the government will add to their savings. [13:41]
• Following a summary of key points from Bex [18:15], Simon mentions three final points to note: (1) Generally, Cash ISAs tend not to have any significant, unique benefits for investors at the present time [18:30]; (2) If, for any reason, you need to invest more money than can be accommodated within an ISA, you could consider a General Investment Account, and it might also be worth investigating the option of seeking advice from a financial planner [19:32]; (3) Listeners to the podcast may have heard of Investment Bonds, but it would usually be expected that this option would be explored only after other investment vehicles have been fully utilised. [20:18]
• As ever, please contact us via whereyourtreasureis@freerangepodcasting.co.uk, or on Instagram via @whereyourtreasureispodcast. The next Season 3 episode will be on investment strategy; in the meantime, Episode 4 of Season 2 (Your First Home) will be published next week. [20:50]

This show has been brought to you by Free Range Podcasting.