Banish ISA Myths For Good and Make the Most of the ISA Opportunity, says Fidelity International

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Separate ISA fact from fiction with Fidelity’s ten point guide. Investors can learn all about ISAs to allow them to get the most out of their ISA allowance.

The new rules coming into effect tomorrow, and the subsequent changes which are set to happen at the start of the new tax year present investors with a bigger ISA opportunity than ever before. Fidelity’s ten point guide should go some way in helping investors to finally put the long standing myths to bed and fully understand what is available to them.

As the new rules for ISAs come into play tomorrow, Fidelity International is urging investors to shake off any misconceived views – both new and old to make the most of the tax breaks available to them:

1.    I can only invest in stocks or cash and not both – FALSE: You can open one Cash ISA and one Stocks & Shares ISA in each tax year. These can be with a single ISA provider or with two different ISA providers. They will have a combined limit for each tax year.

2.    Over 50’s will be able to invest more than those investors under 50 years old – TRUE: But this is set to change. From the 6th October 2009 the single biggest ISA limit increase comes into effect taking the limit for those aged over 50 to £10,200. However, the new limit will be available to all investors from the start of the new tax year.*

3.    I don’t know where I want to invest but if I miss this year’s ISA, I miss out – FALSE: For those investors who want to take advantage of their ISA allowance but are unsure where to invest, there is an option in the shape of Fidelity’s ISA Cash Park. Investors can simply ‘park’ the money and decide at a later date where to invest – all tax efficiently.

4.    If I buy an ISA I have to put all my eggs in one basket – FALSE: You don’t have to invest in the same share, fund or even asset class as long as you use the same ISA provider. If you choose a provider like Fidelity FundsNetwork™, you can invest in funds from many different companies.

5.    ISAs are only for the well off – FALSE: Investors can choose to invest either by lump sum or by regular monthly payments to spread out the investments through the year. Through Fidelity, these monthly payments start from as little as £50. If you invested £50 a month for 10 years, this could amount to a pot of money worth £8,846.**

6.    ISAs are tax efficient for higher rate tax payers - TRUE: ISAs are particularly valuable if you're a higher-rate taxpayer. However, basic rate tax payers also benefit by keeping almost a third of their investment returns out of the hands of the tax man.

7.    Investing in an ISA means I don’t pay income tax on my investments – TRUE: You can also save capital gains tax and that means an extra 22% boost if that tax would have been payable, and higher rate taxpayers get savings from dividend payments as well, giving a compound 33% boost.***

8.    Investing inside a stocks and shares ISA is far more restrictive than if I invest outside one – FALSE: As long as you use the same ISA provider you don’t have to invest in the same share or fund or even asset class. You can also access your investment at any time.

9.    Opening an ISA is time consuming and I will need to complete a tax return – FALSE: It’s a simple and straightforward process and will not add a significant amount of time to the time you would already have spent deciding where to invest; ISAs do not have to be recorded on your tax return. In fact, they should actually make your life easier.

10.    ISAs are always risky – FALSE: An ISA is not about taking more risk with your money or less risk with your money. It’s simply a tax wrapper that shields your investment return from the taxman, wherever you may chose to invest.

Rob Fisher, head of personal investments at Fidelity International, says: “ISAs have been around for several years now, and while they are widely understood, we believe some lingering perceptions remain that quite simply stop some investors taking advantage of the benefits that are theirs for the taking."

“The new rules coming into effect tomorrow, and the subsequent changes which are set to happen at the start of the new tax year present investors with a bigger ISA opportunity than ever before. Fidelity’s ten point guide should go some way in helping investors to finally put the long standing myths to bed and fully understand what is available to them.”

More details on ISAs can be found on Fidelity’s dedicated ISA and Tax page on the website by clicking on this hyperlink fidelity.co.uk alternatively investors can telephone Fidelity’s InvestorLine on 0800 41 41 61.

Notes to editors:
*Source: http://www.thisismoney.co.uk/news/article.html?in_article_id=483036&in_page_id=2
**Source: Fidelity International, based on MSP of £50 over 10 years, assumed rate of 7.5%pa, no initial charge or fees
***Source: The Importance of Being an ISA Insight Paper, Fidelity FundsNetwork CB36151/0310

FIL Limited (“FIL”) and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US. The Fidelity ISA is offered and managed by Financial Administration Services Limited. The value of tax savings [and eligibility to invest in an ISA] will depend on individual circumstances and all tax rules may change in the future. Cash may only be held in the stocks and share component of an ISA on a temporary basis, for the purpose of investing in qualifying investments. Interest earned will be subject to an HM Revenue and Customs charge of 20%. The value of your investments can go down as well as up and may be affected by fluctuations in exchange rates. Investors may not get back the amount invested.

For further information, please contact:
Sam Slator    
Fidelity International    
01737 837 847    
07841 783882    

Ali Boyle
Fidelity International
01737 837 881
07904 996086

Press office address: Fidelity International, Kingswood Place, Millfield Lane, Lower Kingswood, Tadworth, Surrey, KT20 6RP.

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