Introduction

Individual Savings Accounts (ISAs) have revolutionised savings in the UK. After their initial trial period, the Government has confirmed that they are here to stay.

Friendly Societies have been able to offer ISAs since the year 2000, and we were in at the start. Like our other tax exempt business, ISAs enjoy higher rates of bonus and therefore higher returns than traditional savings products, as we do not have to pay any tax on the interest and capital gains we make on the money you invest with us.

ISAs are also much more flexible than other forms of saving -

• You can mix lump sums with regular savings.
• You can stop premiums or cash in when you wish.
• You can choose a different provider each tax year.
• You can transfer ISAs from one provider to another.

Each eligible person can have two types of ISA at the same time, a Cash ISA and/or a Stocks & Shares ISA, and in each tax year you can choose a separate provider for each type if you wish. There are however limits on the amount of money you can pay into your ISA(s) in each tax year: -

• An overall maximum of £7,200, split between the two types and
• a maximum of £3,600 into a Cash ISA.

So for example in one tax year, a person could invest:

• £7,200 into a Stocks & Shares ISA or
• £3,600 into a Cash ISA plus £3,600 into a Stocks & Shares ISA or
• £2,400 into a Cash ISA plus £4,800 into a Stocks & Shares ISA

Were you born before 6th April 1960?

From 6 October 2009, the ISA subscription limit will increase to £10,200 for anyone eligible to invest in an ISA who was born on or before 5 April 1960 (i.e. who will be aged 50 or over during the current tax year). Up to £5,100 of the new ISA allowance can be saved in a cash ISA with one provider. The remainder of the £10,200 can be invested in a stocks and shares ISA with either the same or another provider. Alternatively, the full £10,200 can be invested in a stocks and shares ISA with one provider.

Example 1

An individual is aged 65. He has not opened an ISA in tax year 2009-10. From 6 October 2009 his ISA allowance will be £10,200. Up to £5,100 of his allowance can be saved in a cash ISA with one provider. The remainder of the £10,200 can be invested in a stocks and shares ISA with either the same or another provider. Alternatively, the full £10,200 can be invested in a stocks and shares ISA with one provider.

Example 2

An individual is aged 70. She has opened a cash ISA in 2009-10 in which she has subscribed £3,600. From 6 October 2009 she will have an ISA allowance of £10,200. She could save up to another £6,600 in ISAs. This could be up to £1,500 in the same cash ISA, or up to £6600 in a stocks and shares ISA with either the same or another provider, or a combination of both.

Example 3

An individual's 50th birthday falls on 15 March 2010. He has opened up a stocks and shares ISA in 2009-10 in which he has subscribed £7,200. From 6 October 2009 he could save up to another £3,000 in ISAs. This could be up to £3,000 in the same stocks and shares ISA, or up to £3,000 in a cash ISA with either the same or another provider, or a combination of both.

Note: From 6 April 2010, these higher limits will apply to all eligible ISA investors, irrespective of date of birth.

The MPFS ISA is a Stocks & Shares ISA, so you can invest in a Cash ISA elsewhere if you wish.

We are happy to answer any questions you may have on our ISA or any other MPFS product.