Last-minute investment trust ISA deals
With 5 April fast approaching, many investment companies have launched special ISA offers to encourage investors to make the most of their tax-free allowance.
J.P. Morgan Asset Management is offering investors 0% initial charge on all lump sum investments in J.P. Morgan Investment Trust ISAs when purchased online, until 30 April.
The offer applies to all 19 investment trusts managed by J.P. Morgan for 2009/2010 and early bird 2010/2011 Isa allowances.
Investors can take advantage of the offer by visiting the company's recently launched online wealth management service, J.P. Morgan WealthManager+ through which all of its investment trusts can be purchased.
The firm is also offering investors who invest offline an initial charge of 0.5% on all lump sum ISA investments in their investment trusts until 30 April. Free switching and ISA transfer is also available.
Speaking about the opportunities of investing in an ISA, David Barron, head of investment trusts at J.P. Morgan, says: "Using your ISA allowance remains one of the best ways of building long-term savings."
He says that investors who utilised their full ISA allowance each year from 1999 to 2009 in the JPMorgan Indian Investment Trust, for example, would now have £262,000.
"In addition, the increased ISA allowance of £10,200, which can be invested as a lump sum or through regular savings of up to £850 per month, is a welcome opportunity to put more money into equities in a tax-efficient way," Barron adds.
Elsewhere, Aberdeen Asset Managers is also running a special offer: no initial or brokerage charges, just £24 plus VAT a year per person per ISA account on 15 investment companies.
Alliance Trust Savings is offering investors that buy an investment trust online a fixed fee of just £12.50 or £20 by post.
Investors putting at least £100 per month into Baillie Gifford's investment companies will be rewarded with no initial charge and no dealing commission. Any new ISA investment between 1 March and 30 April will also receive a £10 Amazon voucher.
Over at Caledonia Investments, ISA investments will have their initial charges waived and the first year's annual administration charges waived for ISA taken out before 5 April.
Meanwhile, F&C Asset Management is offering a one-off annual fee of £60 across its 14 trusts, no matter how many ISA you hold with it.
And Gartmore has removed its initial 3% fee from all new investments in its ISAs.
Finally, Witan is offering free dealing on its ISA until 5 April. The offer is subject to a minimum £2,000 lump sum investment for new applications and £500 top-up for existing Isa holders.
Annabel Brodie-Smith, communication director at the Association of Investment Companies, urges investors to act quickly as there is less than two months to go until the end of the tax year.
"Investment company ISAs benefit from the features of investment companies – the closed-ended structure which allows managers to take a long-term view, the independent board who look after shareholder interests, the ability to gear and generally low internal charges," she adds.
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.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
The ISA rules allow investors to transfer money from an uncompetitive savings account with one provider into one from another provider that pays a better rate of interest. The bank to which you are transferring the money must do the transfer process, as withdrawing the money from the ISA wrapper means you lose the tax-free status. You can transfer a cash ISA into a stocks and shares ISA, but not the other way around and the current tax year’s cash ISAs must be moved whole to a single provider, but previous years’ ISAs can be split between new providers.
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.
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.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).