Words About Things

The amount of money that can be saved in a tax free ISA was increased on the 6th of October for those aged 50 and over. The rest of us will see our ISA allowance increase at the beginning of the new tax year in April 2010. The new top limit is £10,200 half of which can be cash with the other half being shares:

A cash component: a cash deposit that is similar to any other ordinary savings account, apart from the tax-free status. A TOISA must consist solely of a cash deposit.

A stocks and shares component: the money is invested in ‘qualifying investments’ consisting of any combination of stock market equity investments (with no geographic restriction), public debt securities such as government or corporate bonds, or cash “awaiting investment”. As a consequence, the risk profile of the ISA may be anything from low to high. The investments may also include or consist of property funds or derivatives such as options. This element may be self-invested and managed through a stockbroker, but the majority of investors invest collectively through a collective investment such as a unit trust, OEIC or investment trust.

The limit has risen from £3600 per year cash allowing us to save an extra £1500 tax free. Unfortunately 40% of Britons feel unable to save. Those who can save may not see a great deal of benefit in having their money in a low-interest ISA rather than a standard savings account. Still an ISA is a good way of saving and keeping the dreaded tax man at bay.

Today it was reported that the country is still in the grips of a recession much to the surprise of most. The nation’s economy contracted by 0.4% between July and September which was the sixth consecutive quarter to see a reduction.

As the graph above shows the GDP has reduced by less this quarter but the fact that there was a reduction means that this is the longest recession we have witnessed.

A recent survey has shown that almost half of Britons are unable to save. Only 60 percent of those asked managed to put money into their savings account each month, saving on average £206. Back in January 34% said that they were unable to save. Of those who were able to top up their savings 65% used instant access savings accounts.

Another survey back in July found that a quarter of people had no savings put aside at all. With unemployment still rising those who are not saving must be concerned about what will happen if the are made redundant. We are lucky enough in this country to have support systems in place for those out of work but it is still not a good time to be job hunting.

Those unable to save should console themselves with the fact that ISA interest rates have hit an all time low. Its great to have saving to fall back on but those savings wont be growing by much until the economy recovers.

The government recently unveiled car scrappage scheme is proving popular particularly with older drivers. The scheme was introduced to try to kick start the sales of new cars whilst reducing the amount of old cars on the road. In order to tempt drivers to update they have offered £2000 discount on a new car to those who scrap a car that is over 10 years old.

So far the scheme is proving most popular with retired drivers with fixed incomes. They often feel that as they are not receiving much in the way of interest on their savings them might as well invest in a new car.

Smaller, cheaper to run models such as the Citroen C1 are the most asked about so far suggesting that most drivers are concerned about ongoing fuel costs.