FSA/PN/021/2001
21/02/2001

With the end of the tax year fast approaching and thousands of consumers anxious to use up their ISA allowance, the Financial Services Authority (the FSA), the independent financial watchdog, is encouraging consumers to read its guide on ISAs and shop around before buying an ISA.

Deborah Arnott the Head of Consumer Education at the FSA says:

At present consumers are being inundated with ISA advertisements wherever they look. There are numerous guides giving their recommendations landing on doormats and tucked inside our weekend newspapers. With this bombardment going on, it is important to understand fully what each investment or savings scheme offers you and whether its right for you. The FSA guide is designed to help you ask the right questions so you can make an informed choice before signing on the dotted line."

The ''FSA guide to ISAs'' is aimed at first-time savers and investors and offers general guidance on ISAs but could also be relevant to anyone who wants to refresh their memory on the dos and don''ts surrounding these investment products. Here are some of the dos and donts when buying an ISA:

DO

  • Find out about the tax benefits of an ISA by asking your ISA manager. Also check out the costs and associated charges you have to pay to set up and run your ISA to ensure they dont cancel out the tax benefits.
  • Check out CAT standard ISAs. They meet minimum standards for charges, access and terms making sure you get value-for-money.
  • Find out the differences between maxi and mini ISAs you can either have up to three separate mini ISAs in either cash, insurance or stocks and shares or one maxi which allows you to put
    money into up to three different components in the same wrapper: cash, stocks and shares, insurance;
  • Think carefully about whether you are comfortable with investment risk before you put your money into a stocks and shares or insurance ISA;
  • If in doubt check with the FSA Consumer Helpline to see the firm is authorised before handing over your money. ISA managers can be banks, building societies, investment firms, stockbrokers, insurance firms, solicitors or financial advisers.

DONT

  • Take it as read that an ISA will be suitable for you just because it features in a top ten ISA guide. Check the details carefully and shop around for the best deal;
  • Take on an ISA if you have a big credit card bill outstanding, for example, its usually best to use spare cash to pay off debts first;
  • Exceed your limits for an ISA. (You can invest in up to three mini ISAs, which can consist of one of each, 3000 in a cash ISA, 1,000 in a life insurance ISA and 3,000 in a stocks and shares ISA, or 7,000 in one maxi ISA.
  • Put your money into a stocks and shares ISA if you think you will need ready access to your money over the short-term.

The FSA ISA guide explains in plain language the options open to consumers and has a list of useful questions to ask a financial adviser and useful contacts for more information. The guide is available from the FSA Consumer Help on 0300 500 5000 (calls charged at local rate).

Notes for editors

  1. The FSA guide to ISAs, is part of a series of guides and factsheets available from the FSA Consumer Helpline. Other guides in the series include; repaying your mortgage, financial advice, and making a complaint. All publications are available on the FSA website: www.fsa.gov.uk.

  2. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

  3. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal

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