Your Simple Guide To The Investment ISA

These days, there are more ways to save and invest than ever before. Developing a good understanding of different financial products gives you the power to make the best choices for you, your money and your future.

In this article, we will explore the Investment ISA, a product you may not have heard of before.

Throughout this article, we will explain what an Investment ISA is, who qualifies for it, and how much risk is involved in an Investment ISA when compared to other types of investment.

What is an Investment ISA?

At Sheffield Mutual, our Investment ISA is classed as a Stocks and Shares ISA, which is a product that you might be familiar with already.

However, the key difference is that our Investment ISA is designed to provide greater stability than your standard Stocks and Shares ISA, so you should hopefully see less variation in your investment account on a daily basis.

We achieve this stability by diversifying our investments beyond just stocks and shares and investing in historically more stable areas, like property and bonds.

Who Can Have An Investment ISA?

All UK residents qualify for an Investment ISA if they are over the age of 18.

In addition, any Crown servants serving overseas also qualify for an Investment ISA, as well as their spouses or civil partners.

How Does An Investment ISA Help My Money Grow?

Every April, Sheffield Mutual will review the performance of our investments and declare the current tax year's bonus rate and set an interim bonus rate for the next tax year.

The interim and declared bonus rates depend on various factors, including how the with-profits fund has performed in the year and other factors such as inflation.

However, it is important to note that bonuses are not guaranteed.

Bonuses are calculated daily, after charges and, once declared, are added to your policy monthly, on a compounding basis. Interim bonuses are added to your policy, but because interim rates are not guaranteed, these could go up or down before being declared.

Every April, you will receive a new statement advising you of the value of your policy, plus any bonuses. 

What Investment ISAs Does Sheffield Mutual Offer?

Sheffield Mutual offers a Single Premium Investment ISA for members to invest lump sums ranging from a minimum of £300 up to the maximum annual ISA contribution cap of £20,000. We also offer a Regular Premium Investment ISA, which helps our customers set up regular investments into their ISA, starting from £30 a month. 

Where Is My Money Invested?

When you open an Investment ISA with Sheffield Mutual, your money is pooled with other Sheffield Mutual Investments into our with-profits fund, which is designed to accrue value while attempting to minimise the risk to your investment.

This with-profits fund comprises a diverse range of investments, including equities (stocks and shares), property and cash. Because of this diversification, we hope to create a more stable investment for your money.

What Risks are Involved?

All investments carry some level of risk, which is expressed through the Summary Risk Indicator.

Using this rating, our Investment ISA has a rating of 3 out of 7, making it a medium to low risk investment. This means potential losses on future performance are considered unlikely. 

Can I Withdraw From My Investment ISA?

You can withdraw from your Investment ISA at any time, with a minimum cash withdrawal of £250.

However, if you have subscribed to the maximum ISA limit of £20,000 and make a withdrawal, you cannot add those funds back in, else you will exceed your ISA tax year limit. This means that any withdrawn and subsequently re-deposited money will count towards your £20,000 ISA cap.

It is also important to note that if you withdraw cash from your ISA during adverse market conditions, a market value reduction may be applied to the fund, which could lead to you receiving less money out than you put in.

Our Investment ISAs have been designed to be medium to long term investments, so we always recommend leaving your money invested for 3 to 5 years or more.

Are There Any Charges Involved?

For our Investment ISA, Sheffield Mutual deducts 1.25% of the value of the ISA Policy fund each year to cover administration costs and expenses.

This amount is typically deducted from the value of the bonus. However, if the value of the bonus is less than the value of the charges, any difference will be deducted from the value of the fund itself.

What Happens If I Die?

If one of our policyholders dies with an Investment ISA, Sheffield Mutual will pay the policy value (the remaining capital plus any bonuses) plus 1% to your representative or your estate.

Spouses and civil partners are then able to reinvest the same amount the deceased policyholder had saved into their own ISA by utilising their Additional Permitted Subscription allowance.

This allowance allows a surviving spouse or civil partner to reinvest the value of their partner’s ISA holdings into their own ISA account, without affecting their own annual ISA allowance. For any additional information about this allowance, please read our Additional Permitted Subscription helpsheet.

Browse Our Investment ISA At Sheffield Mutual

At Sheffield Mutual, we are committed to providing clear and efficient ways to help you invest your money. If you are considering saving money with an Investment ISA, please carefully read our Key Information Document and Important Information Document before committing to an investment strategy.

If you would like to speak to a member of our team about Investment ISAs, feel free to contact us via email at enquiries@sheffieldmutual.com or by calling us at 01226 741 000.

This blog provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan suits you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.