People should not wait until the last minute to put money into an ISA, the Financial Ombudsman has warned.
Savers and investors have until Thursday 5 April to put this tax year's allowance into a cash ISA or stocks and shares ISA. For the 2011/12 tax year the annual limit is £10,680 while in the next tax year it will rise to £11,280.
The Financial Ombudsman Service says many of the complaints referred to them involving cash ISAs are where the saver tries to deposit cash into the ISA near the end of tax year, but the ISA provider is unable to carry out their instructions in time.
"In these cases, the consumer was unable to use their ISA allowance (or part of it) for that particular tax year - and could be disadvantaged as a result," says Natalie Ceeney, the chief ombudsman.
Extended hours
However, some companies are keeping their branches open and call centres open longer to help ease the rush of last-minute ISA money that is expected.
Halifax is extending its opening hours in branches in England and Wales to 7pm from 2 April to 5 April.
Bestinvest is extending its deadline for online stocks and shares ISA contributions to 11.59pm on 5 April, and to 10am on 5 April for postal contributions.
Research by Virgin Money shows that more than three times as many cash ISAs are opened each year compared with the stocks and shares versions.
The best rate on a cash ISA currently comes from AA Savings and Cheshire Building Society, which both pay 3.5%.
However, with interest rates expected to remain at 0.5% for the next few years, savers willing to take some risk and that are saving for the long term should consider using some of their allowance in a stocks and shares ISA.
Scott Mowbray at Virgin Money comments: "Adopting a mix and match approach using both cash and stocks and shares ISA allowances, depending on what you are saving for and what you can afford, can help you get the balance right between rainy day money and saving for the future."
This article was written for our sister website Money Observer
Stocks
In the UK, stocks are fixed-interest securities such as corporate bonds and government gilts. In the US, stock is the most widely used term for shares; a diminutive of the term “common stock”.
ISA allowance
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.
Ombudsman
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Building society
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.
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.
