ISA's questions from someone clueless!

elizabeth_mary

I've recently changed roles to a company without a pension fund... I was wondering, to save money etc, I have been advised to look at opening an ISA.

I have savings accounts already but I am free to add and withdraw funds as I need them.

What happens if I don't save the full £3600 within this year? Will it still act as a saving account or will I be taxed on the balance for not reaching the full amount?

debbie42

elizabeth_mary wrote: »

I have savings accounts already but I am free to add and withdraw funds as I need them.

What happens if I don't save the full £3600 within this year? Will it still act as a saving account or will I be taxed on the balance for not reaching the full amount?

You can add and withdraw cash to an ISA too. The only restriction is that you can't pay in more than your annual allowance (currently £3600). Withdrawals aren't taken into account, so, for example, if you paid in £2000, then withdrew £500, you'd still only have £1600 of your allowance remaining to pay in.

If you don't use your full allowance then it doesn't affect the tax free aspect of the savings at all. They can carry on accruing tax free interest.

lisyloo

Hi,

who has advised you to save in an ISA?
Is this a financial advisor or jsut a friend?

Thre are pros and cons of ISAs vs pensions that you need to be aware of.
One of the major benefits of pensions are that you get tax relief on the contributions.
e.g. If you pay in £80 you will get £100 in your pension as you get the £20 tax back.
However you have to pay tax when you get the income in retirement, so some would say it's academic.
This is not however true if you pay 40% tax now and expect to pay 20% in retirement.

One of the downsides to pensions is that in return for the tax break, you cannot touch the money until you retire, whereas with ISAs you have freedom.

The advice you have had may be correct, but I would caution you to try to understand the pros and cons if the advice has come from am amateur rather than a professional.
There are pros and cons and these need to be considered in the context of your circumstances e.g. tax rate.