How Many ISAs Can I Have?
How many ISAs can I have? Not sure? Don’t worry, not many people are. Sifting through all the different ISA rules and regulations can sometimes be hard work. Comparable to wading through treacle wearing led boots if you ask us. The ISA – as you may or may not already know – has been a prominent feature in the finance industry for the past few decades. An integral part of many saving strategies up and down the country, ISAs have presented individuals with the opportunity to put their capital in a tax-free wrapper, earning them fixed interest rates over a defined period of time.
There are many different types of ISA, all of which fulfil different needs. Different folks, different strokes and all that.
So before we delve into the specifics of each, let’s first start with the basics. If you didn’t already know, you can spread your annual allowance (which now stands at £20,000) over a variety of different ISA types in one year:
- Stocks and shares ISA
- Innovative Finance ISA
- Lifetime ISA
- Cash ISA
You can mix and match any way that you want, meaning that you can blend a mix of cash, stocks, shares and peer to peer investments. If you have an ISA, you can transfer to another provider at any given time. You can either keep your savings in the same type of ISA or transfer them to a completely different ISA, the ball is in your court. ‘Can I pay into 2 cash ISAs’ you ask- unfortunately not. You can only have one of each type.
In some instances, it’s not so easy. This may be down to restrictive regulations on your particular ISA or account agreement. In any case, It’s always important that you are familiar with the specific terms and conditions of your ISA, just in case you do at any stage, decide that you would like to transfer your funds.
Why Mix and Match?
Before we fully immerse ourselves into the subject of ‘ how many ISAs can I have ‘ , let’s go back to one of the fundamentals of investing. Diversification can be understood as an effective way to minimise the amount of risk that
you are exposed to. By mixing and matching your ISA products you are essentially exposing yourself to less of the same risk. This way if something that was specific to one ISA changed the way in which it operated, it more than likely wouldn’t affect the others. In other words, the circumstances that may affect stocks and shares are not necessarily applicable to the likes of an IF ISA that was specifically focussed on property investment.
While stocks and shares ISAs may have the potential of delivering extremely high returns, they do come with a higher degree of risk. Last year it was reported that Fidelity’s Pathfinder offered investors returns ranging from 9.2% to 27.6%. Operating on a high risk, high reward basis, this type of investment offers the potential to earn big, but also lose big.
When choosing an investment, it is important to bear in mind your own personal requirements, as well as what you hope to achieve on a financial level. Stocks and shares ISAs offer a completely different type of investment opportunity to what would be offered through the likes of an IF ISA. The returns on offer can vary greatly and may fluctuate depending on market climates. Then (depending on the type of Stocks and Shares ISA you take out) , you could have the added stress of managerial fees to worry about!
IF ISAs offer individuals the opportunity to invest in ways previously considered out the realms of mainstream methods of investment, namely peer to peer loans. Peer to peer lending pairs investors who are looking to lend money to borrowers, who may be individuals or a company and will pay back the money dependent on the success of their venture.
It is important to evaluate your own circumstance and then apply reason to the investment that you wish to make.
Innovative Finance ISA vs. Traditional ISAs
Our Innovative Finance ISA is a great way to invest in secured property investments at a low-entry point and earn consistent, predictable and tax-free returns- all without the hassle that’s part and parcel of being a landlord. Generally speaking, secured peer to peer ISAs provide fixed returns: in our case we offer 7% p.a. and pay out twice over the course of the tax-year. Like any investment however, these rates are not guaranteed and don’t come without a degree of risk. These risks can range to anything from loans not being repaid on time or property development becomes delayed. With The House Crowd however, our secured property ISA should mitigate this risk by diversifying your funds across multiple loans, thus reducing the impact of any delays.
A cash ISA works much the same as a normal bank savings account, and most high street banks offer several types. At the time of writing (February 2019), the highest available rate on price comparison sites is just 1.95% – well below the current rate of annual price inflation, which means your money will effectively be worth less when the ISA matures.
A stocks and shares ISA, on the other hand, is quite different from a bank account. With this type of ISA, you’re not saving money – you’re investing in it. So, while it’s likely to offer better returns than a cash ISA over time, it does come with all the inherent volatility and risk that comes with investing in the stock market.
Changing Your ISA
Whilst you may have an existing ISA you should make sure that you are getting the most out of your account. If you’re concerned about the age old questions of ‘ how many ISAs can I have or ‘how many ISAs can I open’, transferring your account can help alleviate the pressure. The important thing to bear in mind is that you don’t have to settle for less. With some accounts-particularly old accounts-you may find that after a while interest rates start to dwindle. If this does happen, it would be wise to change your strategy to reflect this. It’s your money at the end of the day, so don’t lose out.
Why might you change an ISA?
- You’ve found a better interest rate
- Reduce your risk
- Manage your money
If you’re not happy with your ISA don’t despair, you can always change it for one more appropriate to your needs. It is pertinent to bear in mind however, that with most transfers there is a penalty fee (not with us!). The House Crowd are now offering ISA transfers. If you would to find out more, visit our Innovative Finance ISA page.