ISA’s at Virgin Money

ISA’s at Virgin Money February 7

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Virgin Money offers three types of ISA: the simple cash ISA; a stock market shares (index tracking) ISA; and a bonds and gilts ISA. The main benefit of ISA’s is that it is not necessary to declare ISA investments to the taxman, ensuring they stay tax free - unlike ordinary bank and building savings accounts, for instance, or unit trusts, where tax is paid on interest earned on savings. Unfortunately, the money invested in ISA’s each year by an individual is limited to a £7,000.

This money can be either invested all at once in a “maxi” ISA or divided into two “mini” ISA’s. Virgin Money’s maxi ISA’s can be made up of all stocks and shares or a combination of stocks and shares with cash. A mini ISA can be made up of either £4,000 worth of stocks and shares and/or bonds and gilts, or up to £3,000 pounds in cash. However, one stocks and shares mini Isa and one cash mini ISA can be held in the same financial year - although mini ISA’s cannot be held in conjunction with maxis, and only one maxi ISA can be held during the course of a financial year. ISA’s should be considered as medium to long term investments, with an investment period of five years considered ideal.

Cash ISA

The over-riding benefit of a cash ISA - as opposed to holding the money in a bank - is that it will not be taxed. Virgin guarantees an interest rate not lower than the base rate until April 5 2007, and for the rate to fall below that level thereafter three months written notice must be given. Currently, Virgin’s current cash interest rate stands at 4.25 per cent. Cash can be withdrawn on demand, with no notice period required, and it is possible to set up a password so that money can be withdrawn over the phone or internet.

Stock market shares (index tracking) ISA

Virgin advertises this option as the best way in which to see money grow. The stock market has the potential to outperform all other modes of investment, although it should be noted that this investment also carries with it an element of risk. Virgin advises that money should only be invested in the index tracking ISA if people are prepared for it to fluctuate in value. However, there is no guarantee that the investment will go up in value even in the medium to long term.

Bonds and gilts ISA

Money is invested in “top-rated” bonds and gilts, so savings earn a good level of interest with a lower risk than investing in shares. However, the bonds and gilts Isa carries more risk than a cash ISA - but unsurprisingly also has a higher chance of earning the owner more significant returns.

Written Exclusively by AdFero for ISA Guides

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