A stocks and shares ISA could be one way to make more of your money. Our guide takes you through the risks and benefits allowing you to find the best investment ISA for over 60s.
If you’re over the age of 60 it can be difficult to make your money work for you. With savings rates lagging far behind inflation, the only way to make real money is to choose long term investments.
However, the need to commit capital for an extended period coupled with the risk to your initial investment means this is a less secure option for anyone who is either approaching retirement or has retired already.
A stocks and shares ISA might be a good option though. Although it brings the same risks as investing, this risk is partly offset because anything invested within you annual allowance is tax free. As with taxable investments you're also able to mitigate risk to some extent through the investments you choose.
What is the ISA allowance for over 60s?
The ISA limit for over 60s is the same as for everyone else, £11,520 for the 2013/14 tax year, and we’re entering a time traditionally seen as ISA season when companies traditionally compete for business.
Finding investment advice for 60 year old
Normally you might be looking for the best cash ISA rates for over 60s, as this allows you to have instant access and no risk. However, this year’s ISA season – certainly in the realm of cash ISAs – has been something of a damp squib with relatively few new products offering rather poor returns, which makes a stocks and shares ISA all the more appealing.
However, investing on the stock market is always a risk and you should find advice from an expert before taking the plunge.
It is particularly important to find someone who can offer specialist advice on the best investments for 60 year olds, which is in line with your situation. This will help you make your money go further and ensure that you're able to access it as and when you need to.
Stocks and shares ISA rules
Before you start it’s important to understand the ISA rules. You can invest anything up to the maximum ISA limit in stocks and shares less any amount you invset in cash. For 2012/13 the cash ISA limit was £5,640 but from April this will rise to £5,760.
You can transfer money out of a cash ISA and into a stocks and shares ISA, but not the other way around. Any transfers you make can only be from one stocks and shares ISA to another.
Before you start it’s important to understand the risks. The value of shares can go down as well as up and you will probably have to commit this capital for a number of years before you get a decent return.
You will also want to be sure your Investment ISA provider will offer a competitive performance. You can check the performance of funds offered by each provider against one another to get an idea of how it has faired in the past.
Although this is far from certain it does give you an idea of the talent of the investment professionals and the chances of securing a good return in the future.
To spread risk you should build an investment portfolio and place money across many different companies and across as many asset classes as possible.
You should ideally have some money in equities, gifts government and corporate bonds, property and cash, to give yourself as much protection against market volatility as possible. You can always look at OEICs and Unit Trusts as a straight forward way to spread your investments and associated risk.
How to compare an over 60 investment ISA
There are many ISA providers offering all sorts of options so it can be difficult to choose one which meets your needs.
You should also look at the likely costs involved. Because Investment ISAs take more administration to run, companies will generally charge fees. You’ll most likely have to pay a deposit fee to cover the cost of buying shares and an administration fee, normally around 1-2% of capital. You might also want to consider whether you want to hand over investment decisions to a fund manager or choose a self-select ISA.
As the name suggests a self-select ISA enables you to pick and choose where you invest your money, while a fund ISA hands over the decision to an expert. Your choice will all depend on how much confidence you have in your own ability to judge the market.