Unfortunately, many people either leave large amounts of their money sitting on deposit in banks or buildings societies or accumulate money in banks or building societies by way of regular savings. Although this might be seen as safe traditionally this money has not been well protected against rises in inflation. Indeed the average UK building society account has consistently fallen behind the rise in inflation which means that money held in banks or building societies has effectively lost its spending power.

That said it has to be recognised that there are and always will be ups and downs in the UK share market. Accordingly, if you are considering investing or saving for a long term, normally more than 5 years, it is generally wise to consider “equity” related investments although this will depend upon individual attitude to risk. Equity related investments are those that are closely linked to the changes to the value of shares.

When considering any investment or savings you must note that past investment performance is no guide to possible future investment returns. The value of your investment, savings and the income you receive may well fall as well as rise.

Individual Savings Accounts

ISA’s, as they are known, were introduced in 1997 and were aimed at replacing Personal Equity Plans, PEP’s, and Tax-Exempt Special Savings Accounts, Tessa’s. The rules that brought in ISA’s deemed that existing PEP’s and Tessa’s could continue but no new investments could be made.

There are different types of ISA’s that can be invested in different investment areas. There are maximums with regards to the amount that can be invested and depending upon the type of ISA most suitable depends the amount that can be invested. Individual Savings Accounts can be purchased to reflect a wide range of individual attitude to risk, ISA’s can be purchased in cash to reflect a very cautious risk attitude although most ISA’s bought tend to be equity based investments although even within those the level of risk and adventure can be restricted in order to reflect individual attitude to risk.

The lack of both income tax and capital gains tax in respect of the proceeds of ISA’s make them an extremely tax efficient form of investment and although they were initially introduced only for ten years, and will be reviewed in the near future, their availability to all UK residents aged 18 and over make them one of the most attractive ways of saving and investing.

Money currently held in ISA’s and in old PEP’s and Tessa’s can be transferred, subject to certain guidelines, in order to continue reflecting investor needs.