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Your user guide to Stocks and Shares ISAs like the Police Mutual ISA

Thu 01 Apr 2021

What is an ISA?

ISA stands for Individual Savings Account. It’s a tax-efficient way to save, meaning it doesn’t incur any UK Income Tax or Capital Gains Tax. Tax treatment depends on the individual circumstances and may be subject to change in the future.

The two most common types of ISA are Cash ISAs and Stocks and Shares ISAs.


What’s a Stocks and Shares ISA?

Whilst a Cash ISA is basically a savings account you don’t pay any tax on, a Stocks and Shares ISA is different. A Stocks and Shares ISA allows you to put money into a range of investments.

For example, when you put money into the Police Mutual ISA, your money is pooled with that of other savers into our Cautious Managed Fund. Money in the Cautious Managed Fund is then invested in a range of other funds, which spreads your money over a wide range of investments.

The Police Mutual ISA is a Stocks and Shares ISA.


How much can I save in a Police Mutual ISA?

Each tax-year you have an ISA allowance, which is the maximum amount you are allowed to save into the different types of ISAs. The ISA allowance for 2021/2022 is £20,000. The tax-year starts on the 6 April each year and runs until 5 April the following year. One thing to bear in mind is that your ISA allowance doesn’t roll over. In other words, you will lose your tax-free allowance if you don’t use it in the current tax year.


Can I transfer an ISA?

You can transfer between different types of ISAs. The only caveat is that if you wish to transfer funds you’ve put into an ISA during the current tax-year, you must transfer all of it. If you’re transferring money you’ve invested in ISAs in previous tax-years, you can transfer all or part of it.

To transfer an ISA, you simply contact the provider you wish to invest with and tell them that you would like to transfer from your current provider. They will take your details and process the transfer for you.

Just make sure you’re aware of any fees you might incur by transferring your ISA. And whatever you do, don’t draw the money out of your ISA yourself, as this may result in you losing out on your ISA benefits and it may not be possible to pay in to your new ISA the amount withdrawn, depending on the amounts involved and the amount you have already contributed to ISAs in the tax year. Always let your new ISA provider organise the transfer for you.


Can I take out a Cash ISA and a Stocks and Shares ISA in the same tax year?

Yes, you can take out both a Cash ISA and a Stocks & Shares ISA in the same tax year. Just remember that the total amount you save across all accounts must not exceed your ISA allowance, which is £20,000 in the 2021/22 tax year.


What are the benefits and risks of a Stocks and Shares ISA?

Broadly speaking, Stocks and Shares ISAs have the potential to outperform Cash ISAs over the medium to long term. Therefore, you should look to save for five years, if not longer. This provides your investment with the opportunity to 'ride out' some of the short term bumps in the stock market.

The main risk with a Stocks and Shares ISA is that its value can go down as well as up. Put simply, you could get back less than you invest.


Open your Police Mutual ISA today.

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Police Mutual is a trading style of The Royal London Mutual Insurance Society Limited. The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL. For your security, all calls are recorded and may be monitored.

Type of article: Articles
Category: Saving my money

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