Want To Invest? How To Start With An ISA

[@keithdechief1]

So glad I stayed up binging on the make money podcast, I'm 39 and turn 40 in Feb, have just opened an additional ISA (Lifetime) as always understood that you could only have one ISA. I've got another pot now that not only is a tax free wrapper, but it gets Government bonus 😁 Feels like an early birthday present so long as I can make the payments to get that bonus! 😊 Thank you guys!!

[@ducatinya]

Very well explained but quite basic. I’d reinforce that the MOST important comparing ISAs and pensions, is the tax relief you get putting money into pensions Vs ISAs being tax wrappers; meaning, and guys have not explained what that means in the long term (some people might not know) that you have to pay taxes when you take money out of your pension on retirement. Something you don’t have to on your ISA.

[@kw8757]

You pay the tax (and NI) on most of the money going into your ISA when you earn it, you pay the tax on your pension when you draw it, although you can offset that a bit with your 25% tax free allowance. You also still have your £12,570 personal tax allowance on your income as a pensioner, so if you supplement your pension with tax free cash from an ISA you can keep your tax bill down.

[@chrisp4170]

With a pension, you are given the tax when you put the money in. HMRC simply want it back when you take it out. The assumption is that you will be in a lower tax band when you take it out than when you put it in. With an ISA you don’t get given any tax when you put the money in, so they won’t tax you when you take it out. You can think of it that all the money in an ISA is yours. In a pension, effectively some of it is a kind of loan from the tax man.

[@davidwalsh9807]

Great episode, basically know some of this but great to go over these topics to help focus the mind. The buzzer is a great idea 😂

[@MakingMoneyPodcast]

Thanks David! Glad you're enjoying it. MM Team

[@imbarmstrong]

Another informative episode Damien. I'll be tuning in again the same time next week to see if T has opened an ISA 😂

[@Riaan3108]

The most important step is to start, then it is to continue. Be deliberate about it. A personal view is that I can’t afford to NOT invest/save.

[@King_Law1]

Good interview for people new to investing.

[@EamonCoyle]

I kinda don't care or think much when it comes to me, I am over 40 and have a very small private pension from when I was working so I tend to think I would be starting too late with too little. I will def be getting onto my niece and nephew about the lifetime ISA, they are both in their 20's and as much as everyone says the system is going to fail etc it really wont, it will just adapt !!

[@rossmacintosh5652]

Even though I live in Canada where we has different accounts I found the conversation interesting with lots of parallels to our situation here. I am however left thinking Paloma & Damian probably didn't totally convince Tea. (Tee? T? Tea?). Many, if not most, crypto investors shoot for the moon anticipating astronomically bigger returns than what was discussed as reasonable expectations for an ISA. It seems the sales pitch was directed to easing the concerns of non-investors afraid of losing their money. For them it was very good advice. In contrast, someone like Tea likely understands market risk far better than a non-investor. I suspect to fully convince him would take more discussion of how having ISA investments in index funds could smooth out his risk profile and serve him long term through diversification. For him the ISA could be more like a safety net to help him if his riskier crypto dreams fail.

[@chrisp4170]

Crypto is gambling. It is just a visit to a casino. Over a long period, investing should be a dead cert. That is quite a difference.

[@rossmacintosh5652]

@@chrisp4170 You're are fooling yourself if you think anything is certain. All investing has risks. Even not investing has risks! Sure crypto investing has bigger risks than many other investments, but it's not like other investments are ever risk free. Taking chances is part of what it is to be human. With our investments we all try to find the balance of risk vs reward that lets us sleep at night. If I don't recognise the risks I may have blissful sleep. It still a gamble whether or not I experience the downside risks I blissfully didn't understand.

[@Equitybonds24]

Also, investing when markets have fallen 20% does not mean you have bought in 'low' it just means you have boughter lower than the price was before... the fundamental price of that asset may be well below the current market price.

[@slayerrocks2]

Yup! "Buy Kodak!" Wouldn't work out so well.

[@pedazodetorpedo]

True if you're picking stocks, but if you're investing in a solid index like the S&P500 then buying during a downturn is absolutely a good opportunity.

[@chrisyates2591]

Very thoughful and helpful interview. We must nationally pivot to save long term and regularly. Not easy but essential for future well being.

[@robkyle2008]

Great stuff. Compulsive viewing.🏆

[@MakingMoneyPodcast]

Thanks Robert! What a great comment, we love hearing that! MM Team

[@chrisp4170]

The chess board thing shows the power of a 100% return. That’s quite ambitious.

[@chrisyates2591]

😂😂😂😂 these presentation make finance fun. Much needed.

[@colinuk1984]

I've got a cash ISA and used it this financial year. Can i open a stocks and shares ISA today and use that one too.

[@gavinlun]

Apart from the constant tutting every time someone starts a sentence it’s very good advice.

[@Equitybonds24]

LISA and pension are not the same if you use salary sacrifice to contribue to your pension as in this scenario you also save NI....... argument for this is stronger for basic rate band where NI is 12%!

[@sopissedoff]

You can't opt to use salary sacrifice ,if your employer isn't doing it , its not as simple ,i work for a fairly large haulier, they have bought several other business, each has there own different payroll , you need new systems , software and training before you can implement it , seemingly no one is interested in looking into it , this is like a lot of small ,medium family firms

[@slayerrocks2]

Money invested for 30 years at 8% return, will return more than 10 times the opening capital. £100 x 12months = £1200 In 30 years at 8% after costs equals £12075. That is only one year's worth of investment. When the figures get larger, dividends become significant, and buy more assets per year/quarter. The last comment about ISAs being the last thing the government would tinker with, has just been blown out of the water, with the fractional shares debacle.

[@goncalovalente6662]

Hi Damo, great episode again! Does the Cash ISA and the S&S ISA need to be opened with the same provider? Or can I have them with different ones?

[@DamienTalksMoney]

No it does not you can have them with separate providers

[@eheld27]

I’ve got a Newcastle building society cash isa it’s 3% per annual is that a good rate or should I move my money else where to get the best rate ?

[@mariuszel759]

Great podcast again! One question though. Let's say we have 10k in some stock or index. Covid happens or something again and it goes up by 300%. We have 30k worth of it now. Would be safe to sell and withdraw let's say 15k and keep the rest on?

[@DamienTalksMoney]

You can do this if you like. The stocks and shares ISA gives you that flexibility

[@TheRealMerl]

So here's a question: I have a Stocks & Shares ISA with Trading 212, that I have already started contributing to in this financial year. Can I open a Stocks & Shares LISA with HL as well and be contributing to both each month?

[@imbarmstrong]

You can only contribute to one of each type in the same financial year. So each new financial year you need decide which provider you are using for your S&S ISA that year and have to stick with it for adding funds to for that year. For instance I've used Vanguard the last couple of years but this April switched to Trading212.

[@DocileSmurf]

Merl, whilst Ian is correct, perhaps I could add to this. Your S&S ISA with T212 is a different ISA product to the S&S LISA with HL. The LISAs come in two forms, Cash and S&S (aka Investment). Therefore, as the two ISAs you've referenced are different ISA products, you can invest in both within the same tax year. There is no issue with holding a S&S ISA and another S&S LISA. They can also be with the same provider or different providers. However, currently at the time of writing this, T212 doesn't offer any LISA (cash or investment) products. Hope this helps.

[@TheRealMerl]

@@DocileSmurf Thanks for the clarification mate. Much appreciated! I thought this was the case, but wanted to make sure, before I did anything

[@imbarmstrong]

@@DocileSmurf good catch, I overlooked the query referred a LISA separate to the S&S ISA.

[@jamesgreville1974]

I thought I was set with my Help to buy ISA but the average house is Bristol is £280k. So I won't get the government bonus at all :(

[@SianJenkins-pj5ud]

Is an index fund an ISA?

[@steve6375]

Isn't max amount you can gift your children 3k a year. But you can put 9k a year into a Junior ISA or can one parent only put in 3k (or 6k if both parents? - and grand parents each put in 3k or what?). Also, if one parent can put in 9k in one year and child is 17, is this a tax free way of giving the child 9k when they become 18?

[@Kaizen917]

I like the LISA as a product but it feels kinda neglected by the government and got horrible backing by providers. Its only a handful that support it and they hardly allow for transfers between one another. Perhaps even more importantly, the fees on many of them arent exactly attractive due to being robo-based platforms.

[@usefulrandom1855]

If anyone has the money to do so, the junior ISA is beyond incredible. £9000 year 1 (I know most can not do this but those who can) will turn into £837,444 at age 67 (that's 7% return allowing for inflation so these are today's money numbers). If you can do £9000 the next year as well, its £1,674,887 WOW. Staggering what 67 years of compounding can do, these are both with zero additional deposits for 67 years. Oh and just for shits and gigs, £5000 year 1 and £35 per month for 67 years is £1,017,542 A lot more reasonable to achieve for most people. It would actually be £5.4 Million but with the buying power of £1 today.

[@mkdons22]

Imagine 9k per year for the first 18 years 😳 I wouldn't trust my kids with that sorta pot tho haha imagine they blew it

[@usefulrandom1855]

@@mkdons22 £344,420 (nice) after 18 years. Do not add another penny until 67 it would be worth £10.5 million in today's money haha.

[@sdsparkes]

Great discussion. Question. I have a stocks and shares ISA, I pay into it and don’t exceed £20,000 allowance in the year, but the investment returns and dividends exceed the 20k limit are these investment returns still tax free. Also what happens after the first year if you just leave your money to grow and don’t add to it, say I left it for 5 years. What happens to my investment returns are they also tax free even if they grow to say 25k+. Hope that makes sense and apologies if you covered this and I missed it.

[@sdsparkes]

Also are dividends part of the investment and tax free if automatically reinvested or counted the same as money you pay in.

[@jamesc328]

Anything wrapped in an ISA, is totally TAX free, so besides a SIPP Pension, it is a great way of investing. Ignore the dividends, reinvest them within the ISA, the 20k limit, is talking about money your are adding to the account from an outside source.

[@Saransh.m]

Yes, if you leave your money there its still tax free and the dividends and interest inside the ISA aren't taxable.

[@Saransh.m]

And the reinvestment as long as its not taken out of ISA and put in again it won't count against the £20k limit. So to reinvest, keep it inside ISA only. Once you take out, its no more part of ISA.

[@sdsparkes]

@@jamesc328 Thank you.

[@pauledwards5170]

Does the 20k limit include the interest you earn? Say I already have 20k in there. New tax year I earn 2k. So this year I can only put 18k in?

[@MakingMoneyPodcast]

No, normally the interest you earn wouldn't count towards your personal savings allowance.

[@declanmcardle]

@10:04 2 to the power of 64 is definitely a lot of weed.

[@goldengoose7492]

Unless you have loads of money spare and need it liquid cash isa is useless. I currently put £400 a month in my club lloyds account that has 6.25% interest (much higher than a cash isa). All my spare money goes in stocks and shares or crypto for the high risk. Good luck to all. And great video guys ❤

[@sandcrushlove]

Just for anyone else reading comments in future that is confused about what kinda ISA you can open/have. I have S&S with T212 which I try to fill with £16k and a S&S LISA with Unity Mutual that I put £4k in per tax year. I do also have a cash ISA with Virgin but I don't put money in it anymore. Just there as an emergency fund.

[@fabianrares]

Isa doesn't help unless you earn over £1000 in interest alone, that is the tax free advice to a normal savings account

[@Discombobulate453]

Even worse when you fall into the 40p tax band, as that tax free interest allowance drops to £500

[@don6570]

ISA or SIPP? Wheres the best place to put your money If you're earning over upper earnings limit of just over £50k. I understand ISA you can get to and SIPP you can’t but government will top up any contribution in a SIPP and if over the £50k could claim even more back. I've currently stopped investing in either to try and save up a buffer/emergency fund.

[@MakingMoneyPodcast]

Thanks for watching Don! This is a really interesting question. We're going to look at pensions in a future episodes, which we hope you'll find useful on this topic. MM Team

[@faenorsjewel5618]

"Pound cost averaging" full on made me cringe Innit

[@Dr.JubairsFinance]

Dolla dolla bills

[@piersfisher4606]

I think T is playing dumb , he clearly knows what compounding is

[@simonh7025]

Please consider removing all the distracting things behind your guests, so harsh on the eyes and makes the video hard to watch

[@DamienTalksMoney]

I will mention it to the producer for the next episodes we record. But we record them quite far in advance.

[@Equitybonds24]

@@DamienTalksMoney Plants look good... more human. Keep them Damo!

[@justinstebbings6711]

Apparently according to the gov.uk, you can no longer get a help to buy isa.