An ISA, or individual savings account, provides a tax-efficient way of saving or investing.
You do not have to worry about paying tax on the money you hold in it – or on any gains you make, or income you receive from it.
You can use a stocks-and-shares ISA to protect dividends from higher-rate and additional-rate tax, as dividends from any shares investments is taxed at 10%; this is deducted at source and cannot be claimed back. While this provides no benefit for basic-rate taxpayers who would pay the same outside an ISA, this is a significant saving for higher and additional-rate taxpayers. But remember, any capital gains are still free from tax.
There are two different types: cash ISAs and stocks-and-shares ISAs. You can put investments (such as funds or shares) into a stocks-and-shares ISA; while you can only put cash into a cash ISA.
*(Please note that Aberdeen does not currently offer a cash ISA, you can only invest in a stocks-and-shares ISA with us.)
To qualify for an ISA, you must be ordinarily resident in the UK, a Crown servant (such as diplomatic or overseas civil service), or the spouse or civil partner of a Crown employee. To open a stocks-and-shares ISA you must be 18 or over. (To open a cash ISA, you must be aged 16 or over.)
With a stocks-and-shares ISA, you can invest your allowance in a wide range of investment funds. Investments held inside the ISA “wrapper” benefit from the ISA’s tax breaks.
At Aberdeen, money in funds can be invested across a range of assets including equities, bonds and property. Most of the investment funds we offer focus on a particular area, but some invest across multiple areas, such as multi-asset and multi-manager funds. This diversification aims to help reduce risk.
We aren’t able to provide any advice to you, so you need to be comfortable making your own investment decisions. However, we hope the information we provide can help you to make informed choices. The value of your investment depends on the performance of the assets of the fund you decide to invest in. Here is a quick run-down of some assets you may choose to invest in.
- Investing in equities – this involves buying shares in a company. Equities offer an opportunity for capital growth over the long term, and you could receive dividends. However, equities can be very volatile and could fall dramatically in value.
- Investing in bonds – this involves buying bonds from the government (such as gilts), or from companies (corporate bonds). Interest is fixed and paid regularly. Historically, bonds are less volatile than equities, but you could also have less of a return.
- Investing in property can include both residential and commercial property; liquidity can be an issue.
You can choose from two of our fund ranges: Aberdeen OEIC (open-ended investment company), and Aberdeen Multi-Manager.
Pooled investment funds, such as our OEICs, aim to reduce the risks inherent in the stock market by spreading your money over dozens of different underlying assets.
With our multi-manager funds, we invest in other companies’ funds. We choose experts fund managers who will then select what he or she believes to be the best underlying assets for your portfolio.
At Aberdeen, you can get started with a stocks-and shares ISA from as little as £50 a month – or with an initial lump sum of £500 or more.
There are two different types of ISA. Cash ISAs are simply savings accounts where the return you get is based on the interest you receive; the interest is not taxed.
There are a variety of cash ISAs available, including instant access and fixed-rate deals. There is no charge for opening a cash ISA.
A stocks-and-shares ISA or investment ISA is a tax-efficient investment account that lets you put money into different types of investments, including unit trusts, OEICs, investment trusts, government bonds, corporate bonds and shares in individual companies.
The amount you make depends on the amount you have invested and the funds you have invested in.
When you decide to close it, you will get back the underlying value of your investment in the funds you have selected at that time.
This type of ISA offers the potential for higher returns than with cash over the long-term. However, there are no guarantees.
To find out more, take a look at the fund literature we produce for the funds we offer; this includes prospectuses, reports, factsheets and brochures. These can be found on the Aberdeen ISA fund page.
Note, however, this is for information only, and should not be used as an indication of how the fund will perform in the future.
At Aberdeen, we offer a range of funds that can pay income.
To ensure you get the regular income you expect from investments held in your ISA, you need to choose the share class that is right for you – and ensure that your ISA is set up correctly.
With “income” share classes, any income generated by the fund’s holdings is paid out to you. By contrast, with “accumulation” units, it is accumulated and automatically reinvested in the fund.
At the same time, the performance of the underlying assets is also key. This includes the dividends from equity funds (variable), coupons from bonds (fixed), and also a mixture of the two with multi-asset and multi-manager funds.
As an investor, getting the greatest income possible without taking any unnecessary risk can be a difficult balancing act. The key is to position yourself for gains, but keep an eye on capital preservation.
In the current tax year, which runs until April 5, 2017, you can invest up to £15,240 in a stocks-and-shares ISA with Aberdeen (or with another provider). Alternatively, you can split this allowance between an investment ISA and cash ISA – or put the whole amount into cash.
If you have an ISA in the current tax year with Aberdeen and have not invested the full allowance, you can top it up before April 5.
As well as the increased ISA limit, a host of additional new ISA rules were announced in the 2014 Budget. Savers can, for example, now split the yearly allowance as they wish between cash and shares; they can also move freely between the two.
Note, however, you cannot top up old ISAs; you can only invest in – and top up – once within the current tax year. Once you have invested the maximum in a tax year, any amounts you withdraw cannot be replaced.
When it comes to investing money with us, you will have to pay a charge known as “Ongoing Charges” which reflect the cost of running our funds. This charge is essentially a percentage of the value of the assets of the funds. It is made up of the annual management charge and other operating costs. It does not include any initial charges or the cost of buying and selling stocks for the funds.
You can use the Ongoing Charges figure to help you compare the annual operating expenses of different funds. More information on these charges is available through the factsheets on the literature section of this site.
As you are not ‘locked in’ to holding your ISA for a certain number of years, you can withdraw your money at any time – although it can take a few days for investments to be sold and then sent to you.
While there is no minimum investment period, OEICs and Multi-Manager ISAs should be viewed as medium to long-term investments, and it is therefore advisable to take a longer-term approach.
A good rule of thumb is to hold your investments for at least five years.
Once you have invested with us, you can continue to manage your investments and track their performance in your online investing account. This gives you control over your investments 24/7.
If you’re a UK private investor, you can use the Aberdeen Portfolio Tracker to keep track of your investments.
Under the ISA rules, you are allowed to transfer ISAs from previous years into the ISA you have in the current tax year.
With the Aberdeen ISA Transfer, you can switch your existing ISAs into your choice of Aberdeen investment funds.
The value of your investment can go down as well as up. This depends on the value of the fund, and means you may get less back then the amount you started with.
The risks vary from fund to fund, depending on the type of assets the fund invests in. It is important to research the risk information for funds before you invest in them.
You can find this in the Key Investor Information Document (KIID).
As an investor, you need to be very careful about the level of risk you are prepared to take. The key is to choose funds which best match your attitude to risk.
Before making any decisions about which type of ISA is right for you, you need to think carefully about your savings goals, and how long you want to invest for.
If, for example, you think you will need access to your money in less than five years’ time, a stocks-and-shares ISA may not be suitable for you. You may be better off opting for a deposit account instead.
You also need to decide how comfortable you are with you investment risk, and the level of risk you are willing – and able – to take with your money at your particular stage in life.
On the one hand, over the longer-term, a stocks-and-shares ISA is likely to offer higher returns.
But on the other, there is no guarantee of how much you might get back; you might end up with less than you started with.
If you’re not sure if a stocks-and-shares ISA is right for you and want guidance making your decision, you may want to speak to an independent financial adviser.
We have been helping people make the most of their money over three decades, and currently have assets of more than £302.7 billion under management (as of 31 December 2016).
Our company mission is to deliver superior asset performance and exemplary client service, through active management processes across diverse asset classes. Here at Aberdeen, our approach to investment is all about transparency and simplicity.