ISA deadlines fall before 5 April
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Investors hoping to invest their ISA allowance before the end of the tax year have been warned than many companies have applications deadlines well before 5 April.
The Association of Investment Companies (AIC) says many investment companies and their managers will have systems in place to accommodate the ‘cooling off’ period, meaning they will not all accept ISA applications up to 5 April.
Annabel Brodie-Smith, communications director at the AIC, says that despite volatile equity markets, over the long-term they normally outperform the returns on ISAs offered by banks and building society.
She added: “The countdown to 5 April has begun and investors still to use this year’s ISA allowance may need to get their skates on. Whilst there is three weeks to go, it’s important not to get caught out as a number of investment company ISA deadlines fall before this date.”
The AIC recommends cautious investors consider phasing their ISA investment. For example, some groups allow you to drip-feed your money into the stockmarket over the next tax year so long as they receive your application before their deadline.
Brodie-Smith said: “Regular saving is well suited to choppy markets, smoothing out the peaks and troughs of the market and this is an option that might be worth exploring.
“The closed ended structure of investment companies is particularly useful in volatile markets, because fund managers can take a long-term view of the market without the worry of having to sell stock to meet redemptions. Their freedom to gear (or borrow) to enhance returns also means that managers can take advantage of any favourable long-term buying opportunities along the way.”
AIC table of ISA deadlines:
|Provider||Postal application deadline||Online application deadline|
|Aberdeen Asset Managers||28 March||28 March|
|Alliance Trust Saving||4 April||5 April (midnight)|
|Baillie Gifford||28 March||n/a|
|BNP Paribas (for TR Property Investment Trust)||5 April||5 April|
|Caledonia Investments||5 April (12pm)||n/a|
|First State Investments UK||5 April||n/a|
|F&C Investments||4 April||5 April|
|Gartmore Investment||5 April||n/a|
|Progressive Asset Management||4 April||n/a|
|JPMorgan Asset Management||4 April (5pm)||5 April (midnight)|
|The Scottish Investment Trust||4 April (12pm)||n/a|
|SVM Asset Management||5 April||n/a|
|Witan Wealthbuilder||3 April (5pm)||5 April (20pm)|
|Source: AIC 17/03/08|
All investment returns are measured against a benchmark to represent “the market” and an investment that performs better than the benchmark is said to have outperformed the market. An active managed fund will seek to outperform a relevant index through superior selection of investments (unlike a tracker fund which can never outperform the market). Outperform is also an investment analyst’s recommendation, meaning that a specific share is expected to perform better than its peers in the market.
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.