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The launch of ISA in 1999 has brought consumers in the UK a favourable way of savings and investment. Distinct to its predecessors Personal Equity Plans (PEP) and Tax-Exempt Special Savings Account (TESSA), the idea of introducing ISAs was to encourage all classes of consumers in the UK to deposit cash on banks where the economy and the saver can both benefit. An Individual Savings Account allows savers to build up their money from a tax-free saving.

Savers who have ISA don’t always have identical interest rate given that these differ depending on the banks. Access to cash also vary since some ISAs have a particular notice periods and fixed terms where you can’t take out your money until the term ends whereas some ISA polices offer savers an easy access to their money.

The basic kinds of ISAs are Cash ISA and Stocks and Shares ISAs. In order to open a Cash ISA, the person should be at least 16 years old while the minimum age to open a Stocks and Shares ISA is 18. Moreover, for individuals who were born before April 5 1960, an amount of £10,200 is their ISA allowance annually and for individuals who are born after April 5 1960 has an ISA allowance of £7,200 but these sums is supposed to go up to £10,200 by April 6 2010.

Why April 5 and 6? April 6 is the beginning of the tax year and it finishes on April 5. Furthermore, be sure to make use of your ISAs allowance within the tax year if not you will lose it when a new tax year start by April 6.

Ever since the credit crunch, the Bank of England’s base rate has sunk to a mere 0.5% per year. So ISA shopping is one of the best move you can do so you can select which one presents a much higher interest rate. Unfortunately, the slow economic recovery is further dragging down ISA interest rates to as low as 0.1% annually. To have a clearer picture of how low this rate is, multiply an amount by .001. Presently, the highest interest rate you can get on an ISA is a maximum of 2.75%.

Other ISA arrangements can even offer higher yearly rates of more than 3%. An ISA with a fixed term of 5 or more years can provide as much as 4.6% annually and this type of ISA is comparable to what is known as time deposits. When opening this sort of ISA, be sure that the amount you are going to deposit is a decided amount because you won’t be able to have access to it within the term.

If you already have an ISA account, other banks that offer a much higher ISA rate can relocate your ISA savings to theirs if you do an ISA transfer. But you should not close your account or withdraw the money because this will not be passed over to the new provider you want to switch over. What you need to do is let your existing provider transfer the account to the new one.

To prevent being caught up with lots of ISA applicants, don’t wait to open an ISA account at the early possible time. During the end of March and the first week of April, it has been proven that more people open ISA accounts than other time of the year. If you open an ISA in a much earlier date, you can avoid the rush and you will also earn your interest rate much sooner.

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