Cash ISA's are always popular savings products amongst regular savers as they enable the saver to invest up to £3,600 and enjoy the income without paying any tax on it. Each citizen in the UK is also permitted to invest an amount tax free into a stocks and shares ISA but given the current financial climate this option is seen as more risky than investing in a Cash ISA.
As with most saving products most cash ISA's offer greater returns for investors who invest all their funds in one go and do not need much access to those funds. For this type of investor it is usually recommended that funds are deposited into a variable rate ISA account to maximise returns, with top rates on this type of product currently at around 3.5%. However, for many savers looking to take full advantage of a cash ISA investing a lump sum upfront is not an option as they simply do not have the resources to do so. An alternative for this type of saver is a regular saver cash ISA.
This type of product allows the investor to deposit £300 monthly and earn interest tax free. Often this type of saving is not as beneficial as investing a lump sum but First Direct have released a product paying 7% monthly interest. The interest on the regular saver account is calculated at the end of each month, with the figure being drawn up from the amount in the account at that time. This product offers great potential income but allows little or no withdrawals so for any saver who will need to access funds from their ISA this may not be the best choice.
Using an ISA is a great way to maximise savings income. For any individual looking at ISA's it is important to compare cash ISA's and use a savings calculator to determine which product is best for the individuals requirements.
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