Hundreds of thousands of people might be regretting the day they watched the catchy ISA adverts that many of the UK’s financial institutions bombarded them with throughout March. The financial media has just reported that millions could be facing severe losses as ISA values fall due to turbulent stock markets.

It’s estimated that as the UK stock market dropped to a three month low, millions saw their ISA values fall, with people losing more than £1,000 each on value terms.

One of the most popular recent schemes has been the equity ISA. It’s reckoned that over three million people in the UK own this kind of ISA and that in March alone, hundreds of thousands of investors would be facing a loss. Few would have believed that ISA values fall quite so dramatically when the market takes a tumble.

ISA values fall when the market has a rout and its calculated that for anyone investing £10,000 – the maximum value of shares allowed – then their money would be now worth only £8,812, a loss of nearly £1,200.

How this scenario would be played out in the financial institutions various marketing campaigns aired throughout the early part of the year is unsure, but customers nursing a £1,200 loss as ISA values fall are hardly likely to be very happy.

The latest stock market woes, which have generally had a comparatively strong performance since the recovery started, have been caused not by a hang-over from the recession, but a worry about the eurozone. And many observers are saying that although this seems a quite recent concern, many were saying that for years the rise of the euro could not be sustained and that a correction was inevitable. Equity ISA values fall when the market hits a problem. Some say that problem has been in the making for at least two years, because those in the know realised that the eurozone problem would one day rear its ugly head.

And how. Greece is the first, but the markets now fear the problem will move to Spain and Portugal, and perhaps even Ireland and Italy. Germany might have stepped in to be Europe’s banker and guarantor, but if the markets feel that Greece was just the first domino, then it’s likely that newspaper headlines proclaiming ISA Values Fall, will be a common occurrence.

Guest Article by Neil Camp

Banking group Barclays has conducted research which shows that many consumers do not fully appreciate the ISA changes which come into effect at the start of the new tax year on 6 April, 2010.

Last year’s budget saw Chancellor Alistair Darling raise the amount people could invest in an ISA from £7,200 to £10,200, and of that, some £5,100 can be held in a cash ISA. And because of that, says Barclays, people are potentially going to lose thousands through not fully exploiting their tax free ISA allowances.

The Barclays research revealed that just over 40% of people were not aware of the changes and what’s more, some 75% did not know that they could invest in a cash ISA from the start of the new tax year.

Andy Gray, head of savings for Barclays said:
“It’s surprising to see that the plans to increase ISA limits across the board haven’t really registered with UK consumers yet. We would urge people to review their savings to ensure they don’t miss out on their tax-free allowance for this year and from 6 April 2010 when the new limits apply to everyone.”

The research went on to break down the towns and cities where people lived who did not know about the changes.

The most ‘ISA aware’ locations turned out to be Cheltenham, Colchester, Derby, Edinburgh, Newport, Portsmouth and Worcester. Some two thirds of people living here were aware of the changes.

Contrast that with people living in Blackburn, Bradford, Brighton, Manchester, Newcastle and Wolverhampton. Here, over half of the people were unaware of the ISA changes.

As to the change in limits – from £7,200 to £10,200 – it came into force, for people born before 6 April 1960 on 6 October, and for all others over the age of 18, it will come into effect on 6 April, 2010.

No doubt the Government will hope that the increased tax allowance levels will stimulate saving, but it appears that it will be up to the financial sector itself to make people in the UK fully aware of what those changes are and when they will be effective.

Guest Article by Neil Camp

October 2009 is the month when the ISA limit increases and research conducted by high-street bank Lloyds TSB shows that 61% of over 50s do not understand the approaching ISA changes.

And the changes, which were announced by the Chancellor in the April 2009 budget, will see ISA rates increase from £7,200 to £10,200 (£5,100 which can be saved in cash), effectively increasing tax free savings for over 21 million savers. And the crunch is, for those born on, or before 5th April 1960 the new limits come into effect on October 6th, whilst younger customers will need to wait until the start of the 2010/2011 tax year next April.

Given the favourable over 50 status of the changes, it has surprised many that only 15% of over 50s know that the new ISA limit will be set at £10,200. Four out of ten over 50s were not even aware that increases have been announced.

Colin Walsh, managing director of savings and investment, Lloyds Banking Group, said, stoically:
“As the UK’s largest ISA provider, we want our customers to be able to reap the benefits of the new rules and make use of their entitlement. This historic low rate environment has meant a challenging time for savers, especially for those who rely on returns to supplement their monthly income, so maximising your full tax free allowance has never been more important.

“Traditionally the ISA transfer market peaks in April around the new tax year, but this year’s changes will no doubt result in a ‘mini ISA season’ as savers look to take advantage of competitive rates on an increased balance.”

Lloyds TSB has made it clear that savers will be able to top up their existing ISA balance in any of the Group’s fixed and variable rate cash ISAs, as well as investment ISA products. What’s more, new customers can also take advantage of the new entitlement and open one of the products offered by the Group’s ISA brands, including Halifax, Lloyds TSB, Scottish Widows, Bank of Scotland, Cheltenham & Gloucester, Birmingham Midshires and Intelligent Finance.

Lloyds TSB also participates in electronic transfers for the cash ISA market, allowing customers to benefit from what they claim is a more efficient process and reduces the delays caused by sending cheques in the post.

Guest Article by Neil Camp

For those over a certain age and looking for a good return on their money, they could do worse than sign up for the Saga Personal Finance Bond.

Offering a competitive Annual Equivalent Rate (AER) of 3.82%, the bond guarantees the rate for its lifetime of 15 months. The AER is based on a calculation of what the holder effectively receives if the interest that was applied throughout the year stayed in the account and itself earnt interest.

Saga bill their bond as a way of getting control over their finances. As little as £1 can be deposited and bond holders can choose to receive their interest paid either monthly, or yearly.

The Saga Personal Finance Bond joins a wide range of products, including two cash ISAs which were recently launched and which again offer the choice of monthly, or yearly interest payments.

With the Saga One Year Fixed Rate Cash ISA annual interest option, there is a rate of 2.95% tax free AER. With the Saga One Year Fixed Rate Monthly Interest ISA monthly interest option, the rate is slightly lower at 2.91%.

Mminimum deposit is £1 and the maximum deposit is dictated by the total ISA cash allowance. There is no notice period if you wish to withdraw your money and interest is calculated daily.

Mr Andrew Goodsell, Chief Executive of Saga Group, said: “Our approach is to offer an increased range of good value savings products to our customers, this is even more imperative at a time when savers, and pensioners in particular, are seeing their savings income reduced as a result of successive interest rate cuts.”

Guest Article by Neil Camp