Are your ISAs fulfilling their potential?

Investment and pension specialist, Martyn Charlwood, explains.

New Stocks & Shares ISAs (formerly ISAs) form a valuable part of financial planning by currently providing individuals with the ability to shelter up to £15,240.00 p.a. from future Income and Capital Gains Tax. However, whilst the NISA wrapper provides the tax shield, what’s beneath the wrapper determines the gains or losses you will make – there is no benefit in holding an NISA to improve your tax position if it fails to make money! For NISAs to be fully effective they need to be competitively priced with the underlying investments providing good returns. In the case of Stocks & Shares NISAs it is all too common to come across individuals who have held NISAs for years where their accumulated monies are languishing in underperforming and sometimes expensively charged funds.

Those who have been paying in to NISAs since 1987 (when they were then known as PEPs) could by now have accumulated substantial sums. For example, had a couple used their full annual allowances each year and had they achieved a net return of 7% p.a. their combined NISA pots would now be worth around £1.4 million.

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Investment returns are of course reliant upon fund performance and the disparity between the best and the worst can be staggering. Employing the services of an investment specialist is what can help make the difference, not just in terms of maximising growth but also preserving and protecting your capital at times of heightened risk.

For those who have traditionally elected to invest via Cash NISAs, the prospect of yet another year of unattractive interest rates lies before them. Interest rates are so low they struggle to beat inflation meaning cash holdings lose value in real terms. This is prompting an ever increasing number of former Cash NISA enthusiasts to transfer some of these funds to Stocks & Shares NISAs in pursuit of improved income and growth potential.

In summary, NISAs offer the potential for a great investment. To maximise that potential you might wish to consider employing the services of an investment specialist.