Au revoir Isas?

By THIS IS MONEY
Updated:

 

I have £7,000 to invest and would like to take out a maxi Isa, but have heard Isa sales are down by 50% this year. Is now a good time to buy or should they be avoided? KG, Maidstone.

John Morrison, independent financial adviser at Hargreaves Lansdown, says: Maxi Isas are generally a good idea for tax payers investing over the medium to long term, because they offer protection against income tax and capital gains tax.

The fact that sales are down should not put you off. Without knowing more about your circumstances I cannot be specific, but in general, if you are retired and looking for an income then you can choose a corporate bond fund Isa which will give you a steady capital base, and a level of tax-free income ahead of that available from banks and building societies.

Consider the M&G Corporate Bond fund, paying just under 6% income. If you are coming up to retirement, or looking to balance existing, more volatile, investments, the income can be reinvested. Now interest rates are falling so some underlying capital growth can reasonably be expected, and the combination of the capital growth and interest reinvested could be very attractive.

If you are looking for longer-term capital growth, consider a stocks and shares Isa. In two or three years time we could be looking back and saying the late summer of 2001 was a brilliant time to get into the markets. The fundamentals in the UK economy look good, and a broadly based, well managed UK fund (as opposed to a tracker which is too limited in its scope) could prove an excellent investment. Consider Societe Generale UK Growth fund. If you are still

nervous then perhaps you could consider phasing the investment in over the next sic months, or invest on a monthly basis.

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