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I am a 50 year old higher rate tax payer and have used my Isa allowance for quite a few years. Would it be an idea to put some of my Isa money into a SIPP to generate higher rate relief?

D Ball, Brighton

Yes this might be worth considering.

As an example if you took £8000 from your Isa and transferred this to a SIPP you would receive £2000 tax relief immediately and could claim back £2000 through your tax return.

Therefore a £6000 net investment results in a £10000 pension.

SM

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I’d like to pay in about £200 per month to an ethical stocks and shares ISA. How do I go about finding out about these or do you have fund recommendations?

Ben Smith, Nottingham

Neptune Green Planet is worth a look and whilst it is a fairly new fund - the manager Chris Taylor is someone we rate.

SM

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I would like to invest in an equity Isa (lower risk or growth). When would be a good time to start? Is it worth doing it through the companies that sell funds and shares and which one would you suggest?

Eve Moteris, London

My advice would be to use a Self Select Isa provider (such as Killik & Co).

This would provide you with much greater flexibility to invest in either individual shares or bonds or any number of qualifying funds, rather than being tied to a particular provider.

Whilst we believe that equity markets are currently very attractive, it is worth remembering that any equity investment should be considered high risk. However if you want exposure to equity markets, I would look at a fund that provides broad exposure, such as the Trojan Fund.

SM

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I’m nearly 30 years old, which Isa should I be looking at for long term growth?

A.M. Dupee, London

Equity Isas offer the potential for better returns over the long term, but you are at the mercy of the stock market.

If you are looking for a slightly less riskier option then you should consider a cash Isa, where you can invest up to £3,600 per tax year. The top rate currently is 3.55 per cent from Barclays Bank or 3.51 per cent from Royal Bank of Scotland. If you open an Isa and the rate falls to an uncompetitive level, you can complete an Isa transfer form and move the money to another provider.

MS

If you are investing for the longer term and can accept a degree of risk, you should look to the equity market.

For total flexibility we would advise investing through a Self Select Isa (such as that offered by Killik & Co) and if you are starting to invest we would recommend you start by using a fund in order to broaden your exposure.

A particular fund we would recommed is the Trojan Fund

SM

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Hi, I have 5,700 to invest in a cash ISA. I want to invest £3,600 before April and the rest following that. Which would you recommend? I probably won’t need to touch the money until after the 2009-10 financial year.

Thanks,

Stephanie Hall

Barclays Bank is currently paying 3.55 per cent on its Golden Isa or alternatively Royal Bank of Scotland is paying 3.51 per cent on its Cash Isa Plus. If you want to fix the rate you are receiving for a year then Nationwide BS has a One Year Fixed Rate Isa paying 3.00 per cent, but access is available on closure only.

MS

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I have used up my 2008/2009 tax free entitlement and have accrued £10,400 in my current ING cash Isa account. I would like to transfer my accrued tax free investment to another provider and still preserve my tax free status. Is this possible?

I would also wish to take out another cash Isa with Druids Friendly Society in the new tax year. (They do not offer the facility of accommodating previously accrued tax free savings within their Isa.)

Brian Turner

Yes it is possible to transfer your ING Cash Isa to another provider and preserve its tax free status

SM

It is still possible to transfer your Isa allowance. You need to obtain an Isa transfer form from the new provider and once completed and handed back this will start the process. You don’t have to have all your allowance with the same provider, so you are free to open the new one in the new tax year.

MS

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Is there any point holding money in An equity Isa when you still get taxed on dividends? I do have one of these but I’m not sure it’s any better than just investing in funds through one of those savings schemes. It seems there’s a bit more choice outside the ISA too. What do you think?

Caroline Mills, Birmingham

Before investing you should always first utilise your Isa allowance.

By doing so any future capital gains will be free of tax and whilst you will pay the basic rate of tax on any dividends that accrue, there is no liability to higher rate tax.

As regards choice, if you invest through a Self Select Isa you pretty much have total freedom where you invest.

Through our own Killik & Co Isa, it is possible to invest in individual shares and bonds on most markets, throughout the world, including funds

With regards to equities the only exception would be AIM listed companies that are not permissible under Revenue rules

SM

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What is the max amount that I can put into an ISA and which accounts offer the best interest currently?

Alex Hughes, Ealing

You can invest up to £7,200 in an Isa, but only £3,600 can be invested in a Cash Isa. If you require easy access and only have this years allowance to invest, then Barclays Bank is paying 3.55 per cent on its Golden Isa.

If you are looking to transfer and existing allowance, but still require access then NatWest is paying the top rate of 3.20 per cent on its e-Isa.

Alternatively, you could consider a fixed rate ISA, which guarantees the rate you will receive on your money. Leeds BS is offering the top rate of 3.50 per cent on its 5 Year fixed rate Isa, which allows you to access 25 per cent of the money in the account during the term without penalty. However, if base rate increases during the term the rate may not be as competitive. Principality BS has a 2 Year Fixed Rate Isa, which pays 3.30 per cent.

MS

You can place £3600 in a Cash Isa.

HSBC offer a fixed rate cash ISA with a rate of 3.1 per cent.

However you could put £7200 into a Self Select Stock and Shares Isa and it would be possible to obtain an income return of 5 per cent plus from a variety of individual corporate bonds or bond funds.

You can even achieve a net dividend yield of 6.9 per cent by investing in the shares of Royal Dutch Shell - notwithstanding that you will have to accept a greater degree of risk and volatility.

SM

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Can I ask each of the experts whether they are using (or have already used) their Isa allowance this year, and where they are planning to invest? anon

I certainly am using my tax free allowance and have been doing so for a few years now. Although rates have fallen, they are still a very competitive option, especially when the tax saving is factored in. At the end of the tax year the rates on cash Isas become much more competitive as the provider all battle to attract savers money. I recently started the process to transfer my money to the M&S Advantage Cash Isa, which last month announced it was maintaining the rate on its ISA following February’s cut in base rate.

MS

I have already used my ISA’s allowance for this year but I am keen to subscribe in the next tax year.

Given the low valuations of most of the world’s equity markets, this is where I shall be looking

SM

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I’ve already got an Isa with smile.co.uk that I opened in 2002. It used to pay a good rate of interest (about 5 per cent), but now it’s just 1 per cent. Where should I put my money now to get a better rate of interest?

Andy Roberts, Hammersmith

The Smile ISA has seen some of the biggest reductions following the base rate cuts. If you are looking for the same type of access to the money like you had with Smile, then NatWest is paying 3.20 per cent on its e-Isa or Marks & Spencer Money is paying 3.10 per cent on its Advantage Cash Isa. Both of these account accept transfers in. To start the process you need to obtain an Isa transfer form from the new provider. The process usually takes around a month to complete, but at the end of the tax year it can take slightly longer due to the increased demand.

MS

This rate of return is not attractive and our advice would be to transfer to another Cash ISA provider.

HSBC currently offer a fixed rate ISA that pays 3.1 per cent AER

SM

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I know you can now transfer your cash ISA into a stocks and shares Isa, but in future years will you be able to transfer it back into a cash Isa?

Sophie Laurence, Leeds

Once you have invested the money in a stock and shares Isa it is not possible to transfer it back into a cash Isa.

MS

No it is not possible to transfer a Stocks and Shares Isa directly to a cash Isa.

The only way you could achieve this would be by taking funds out of your Stocks and Shares Isa (in which case you would lose your allowance) and using the resultant funds to make a new subscription as and when allowed in a Cash Isa.

SM

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With the markets performing so badly over the past few months is now the time to close down poorly performings Isas and how do you get out of them?

Geraldine Hackett, London

You should certainly review the performance of your Isa’s and exit any poorly performing investments, although I would caution against jumping out of equity markets altogether, given the contraction that has already taken place.

When pessimism is this poor, it is normally a good time to buy !

If you wish to change your investments within an Isa this is very straightforward if you have a self select Isa. If not you may have to transfer your funds or their cash value to a new provider.

SM

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I need to transfer from one provider to another but I keep reading horror stories of money going missing, and transfers taking anything up to 3 months. Why should this happen, and what can one do if it happens to you?

Sam Nath, London

Typically it takes around a month to transfer isa money from one provider to another. However, in busier period, such as the end of the tax year it can take longer due to the increased number of transfers taking place. The money remains the responsibility of your existing provider, until it arrives in the account of the new provider. So, it is never in limbo.

Barclays has commented already that it has dealt with the problems it had last year and has put measure in place to make hopefully ensure these things don’t happen again.

MS

The transfer of an Isa from one provider to another should be very straightforward and there are clear guidelines that state that the transfer process should take no longer than 30 days.

If any transfer takes longer than this, you should contact your provider, together with your new Isa manager and complain.

If you still experience problems it is your right to contact FOS - the Financial Ombudsman Service

SM

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Can money placed in a Cash Isa be later moved into an equity/fund Isa the following fiscal year?

Brian Doris, London

Yes - you can move the funds to a Stocks and Shares Isa the following tax year

SM

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Half of my equity Isa investment was placed with New Stars ‘Heart of Africa’ fund. As this fund is now defunct, does it still count that I have used up my Isa allowance for this year? Or can I reinvest that money elsewhere and still get the tax breaks?

Karl Friedrich, Devon

You can transfer your Isa to a new provider, but you are not allowed to add additional funds over and above your Isa allowance this tax year, to make up for any loss you have suffered on the New Star investment

SM

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What is the best cash Isa to choose? Which are paying the best rates?

Bea Holland, Kent

If you need access to your money and only have this years allowance to invest then Barclays Bank is leading the way paying 3.55 per cent on its Golden Isa. This account does not allow you to transfer previous years allowance in. If this is a requirement, alongside instant access then the NatWest e-Isa is paying 3.20 per cent.

Alternatively Leeds BS is about to launch its 5 Year Fixed Rate Isa, which pays 3.50 per cent. Unlike many other fixed rate Isas, this account allows you to withdraw up to 25 per cent of the balance without penalty and accepts transfers in, but if rates increase in the five year term the rate may not be as competitive. Principality BS allows you to fix at 3.30 per cent per annum on its Two Year Fixed Rate Cash Isa.

MS

HSBC currently offer a fixed rate cash ISA paying 3.1 per cent AER

SM

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My husband and I hold all our savings in a joint e-savings account but the interest on this gets taxed. Can we open a joint Isa for our savings instead?

Anna Perkins, Leicester

Isa cannot be opened in joint name. If you wish to invest in an ISA you would have to open an Isa each and invest your money sepeartely.

Michelle Slade

Unfortunately joint Isa’s are not allowed - although interest that accumulates in a Cash Isa is free from tax

Simon Marsh

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