Holly Black: Welcome to the Morningstar Investment ABC. We're going to go through some of the most common acronyms in the investment world which sound really confusing and off-putting, but aren't as bad as you think, and the aim is to prove that investing is as easy as ABC.
Edie Willson: Hello. My name is Edie Willson and today’s word is ISA. I is for individual. S is for saving. A is for account.
Black: Thanks very much, Edie. So, yesterday’s word is ISA; individual savings allowance. So, these are one of the most common ways to save or invest in the U.K. And the reason everyone likes an ISA is because any gains or interest you earn on the money you have in one of these accounts is tax-free and that’s always great.
So why ISA? I individual, because every person gets an ISA allowance each year. It resets with a tax year in April. Adults in the U.K. can put £20,000 a year into these accounts and for children the allowance is £9,000 into a Junior ISA.
S for savings. This one is a bit of a red herring because actually while you can’t just get savings ISA, you can get an investment one as well. So, very much depends on which type you want to save or grow your money, and in recent years, there’s been a proliferation in the number of ISAs, too. So, you actually open one’s that you can use to invest in peer-to-peer loans, one’s where you get a bonus when you come to buy your first house and one’s that you can use in retirement and get bonus for as well. We’ve got whole other video on that, so do check that out.
And A is for account, because it’s an account. That’s a nice easy one.