ISAs: what are they, and which one is for me

Since being launched back in 1999 Individual Saving Accounts (ISAs) have been very popular for those wanting to put money into savings. There are four types of ISA, and the majority allow flexible saving and the ability to withdraw funds easily. There are financial penalties on certain products, these usually pay the most interest.

Four types of ISA

• Cash ISA
• Stocks and shares ISA
• Innovative finance ISA
• Lifetime ISA

You can choose to save up to the personal allowance across a number of accounts or products (excluding the Lifetime ISA).

Criteria to open an ISA

In the UK you must be a UK resident (or if not meet other specified criteria). You must be 18 years old, unless you are opening a Junior ISA (under 18 and a British citizen). If you are opening a Lifetime ISA you must be under 40 years old.

Lifetime ISA

The Lifetime ISA is specifically to either help savers purchase their first home, or to save for later life (pension). You need to be over 18 and under 40 years old to open an account and you can put in up to £4,000 each year until you are 50. The government will add a 25% bonus up to a maximum of £1,000 each year.

Not for everyone

Depending on the product you go for, you may end up locking your money for some time and aren’t able to withdraw it without penalty. ISAs are aimed at people who pay tax on the interest their savings make. If you don’t pay tax on interest (total ISA allowance is £20,000 per financial year), you may find you earn more interest on a standard savings account.