Look at the date people. This means two things. First up - Happy Lockiversary! Just imagine if someone had told us 12 months ago that we had a year of this ahead of us. . . 🤮
17 days left of the tax year ticketty-tock
Moving swiftly on to something we can control! There are just 17 days left of this tax year to get your stuff into order.
Dishy Rishi has spent all his money and will need to think long and hard about how to claw some back. He already froze lots of allowances in his Budget and there will inevitably be further analysis of ISAs and pensions ahead. I think every saver has to think of the Treasury like an evil alien force, gathering intel and preparing an invasion. Time to batten down the hatches before the nasty green men in their spaceships come for you!
For example - if you are a ‘traditional’ family with 2.2 angelic kids, a Volvo and a well-behaved dog, then you have £58,000 between you to squirrel into tax-free ISAs. We all have £20,000 per adult and £9,000 per rugrat this tax year. (No dog ISAs yet, sadly, although I’d love to market those!)
This does not mean you have to have £58,000 in cash lying around. Look at any investments you have in a general investment account. Did Aunt Bertha leave you some BP shares? Do you have any old funds you bought directly some years ago? Is there anything in the investment cupboard you could shove into an ISA?
Bed and ISA
….is the ludicrously named practice of selling down shares or funds, to immediately buy back in an ISA. (This will realise capital gains on any profits so take this into account – we each have up to £12,300 of capital gains this year we can pocket before tax kicks in.)
What about cash savings? Have you been squirrelling away cash instead of spending it on train fares? Where is this cash? Even if you don’t want to invest in the stock market today, might you in the future? You can put cash into a Stocks and Shares ISA for now and leave it there as cash until the time feels right.
People have certainly been taking action. This week fixed-fee platform Interactive Investor reported that Bed & ISA instructions in January and February were up 306% year-on-year. And 35% of their transfers are coming from cash ISAs.
Don’t be afraid to use Junior ISAs as well. That’s another shelter although remember you can’t take money out of a Junior ISA until the wee one turns 18. And then it does belong to them. (Unless you put a balaclava on and intercept the postman on their 18th birthday.)
Pensions and free money
Don’t forget pensions. So many of you ask me whether to save into an ISA or a pension. The right answer for you – which of course can be “both” - will depend on many things but largely comes down to timeframes.
Adults can take money out of their ISA at any time – nice and flexible. Pensions do get you lovely ‘free money’ in the form of tax relief but that money is locked away. So the closer you get to the minimum pension age (currently 55 and heading to 57 in 2028) , the more a pension makes sense, as its lack of flexibility matters less.
Broadly speaking, we can each pay up to £40,000 a year into a pension and again, this can come from selling down investments outside any tax shelter and moving the cash into a pension, to re-buy here. If you invest on a platform, ask if they can do this ‘Bed and ISA’ or ‘Bed and SIPP’ for you. Annoyingly Hargreaves Lansdown has suspended this service this year. With AJ Bell you have to do it on the phone. Interactive Investor support this online. See what your platform will support but get a wiggle on. This is not an instantaneous process and can take days.
A final note. Research from advice firm Openwork this week confirmed that 22% of parents and grandparents have either accelerated plans to gift money, or increased the amount they intended to gift as result of the pandemic. With a huge £293 billion earmarked for intergenerational transfer, opening up an account for someone younger could be the best present we could give. As long as we live for more than seven years from when we make the gift, our children or family won’t have to pay Inheritance Tax on the gift when we conk out.
If you need help with choosing a new home for your ISAs and pensions, you are in right place. Our new tables complete with 2021 ISA Best Buys and Pension Best Buys have helped 75,000 people over the last month to research this space. Whether your priority is low-cost, something which won’t trash the planet, something easy or a nice digital option with a decent app, there is something for everyone.
If you think you need some financial advice, check out our new service – Boring Money Advice - launched last week, shows you your full range of choices from low-cost online advice to full-fat personalised human advice! We’re not giving the advice but pulling all of your options into one place, and helping you find the right solution for you. We’re also tackling your questions along the way, helped by over 30 financial advisers who are supporting this new launch. Last week saw questions on drawdown pensions, where to begin investing, cryptocurrency and St James Place. Keep ‘em coming!
Happy Lockiversary everyone. I know! Let’s celebrate with a nice…..walk!?
P.S. This week we launched a brand new podcast in partnership with Aviva. I spent a happy part of lockdown in the (sadly socially-distanced BAH) company of the marvellously chiselled-jaw-bearing Mr Vernon Kay, a jolly nice bloke who became my unexpected lockdown pal. We recorded a podcast called Parenting Past The Pandemic which is now OUT, chewing the fat, sharing our experiences and importantly getting tips and insights from a variety of lovely guests. You can download the pods in the usual places or check them out here.
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