With Profits ISA
Wesleyan's With Profits ISA is a stocks and shares ISA which aims to balance out stock market volatility through a process called 'smoothing'.
Like all types of ISA, a stocks and shares ISA brings significant tax advantages – particularly for higher-rate tax payers.
That's because there's no tax to pay on any growth or income you earn through a stocks and shares ISA, and no capital gains tax on your returns either.
Outside of an ISA wrapper, dividends of more than £2,000 would be taxed at 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers. So it's potentially a big saving if you have a lot of money invested.
While many people may not earn dividends of £2,000 a year (or indeed pay the higher rates of tax), investing through a stocks and shares ISA still helps to protect your pot as it grows - future-proofing your savings should you later hit the threshold.
A stocks and shares ISA might be suitable for you if you are...
An investment ISA can help grow your pot faster than cash savings, but does expose you to the risks of the stock market.
Most stocks and shares ISAs aim to deliver growth over the medium to long-term, so it’s best for money you don’t need to access in the short-term.
For tailored advice on the best savings or investments options for you, book an appointment with a Wesleyan Financial Services Consultant.
Each tax year (6th April to the following 5th April), there's a certain amount of money you can invest in an ISA. For the tax year 2021/22, that limit is £20,000.
You can put your full allowance in a stocks and shares ISA, or split it across several different types of ISA. For instance, you could put half in a cash ISA, and half in stocks and shares.
Just note that you can only pay into one of each type of ISA in a tax year. So you can't contribute to two different stocks and shares ISAs at the same time.
If you've already started saving into one investment ISA and want to open a new one in the same tax year, you'll have to transfer all your existing savings to the new provider. Your remaining allowance will transfer across too.
Of course, you don't have to use your whole £20,000 allowance. Just be aware that any allowance you don't use won't roll over to the next tax year.
Not all stocks and shares ISAs are the same. Some will invite you to pick your own investment portfolio, while others (like Wesleyan's With Profits ISA and WUTM's Unit Trust ISA) are invested in funds that are managed on your behalf.
That means you don't have to be an experienced investor to set up a stocks and shares ISA. The research, analysis, trading and admin is taken care of by the Fund Manager.
Whatever type of stocks and shares ISA you choose though, you'll almost always have to pay charges. There might be an initial fee to pay when you open your account, plus a management charge which is taken from the value of your investment every year or month.
Management charges can either be in percentage terms or a fixed fee, so just make sure you're clear on how the fees might impact your investment.
Any UK resident aged 18 or over can open a stocks and shares ISA. Many providers will have an upper age limit too (for the Wesleyan With Profits ISA, it's 74 - but there's no upper age limit on the WUTM Unit Trust ISA).
Those under 18 can have a Stocks and Shares Junior ISA - though this must be opened by a parent or guardian on their behalf.
Technically there’s no limit to the amount of stocks and shares ISAs you can hold, so you can open a new one with a different provider each tax year if you wish. Just keep in mind that you can only pay into one in any given year.
Yes, you can – and usually, you can choose whether to transfer the whole balance or just some of it. Regardless of how much you transfer, it won’t affect your allowance for the tax year if the amount you’re transferring was built up in a previous tax year.
Remember though, if you want to, you can hold both a cash ISA and a stocks and shares ISA at the same time, and contribute to both in the same tax year.
You can take money out of an investment ISA just as you would from a cash ISA - rarely are there any penalties for withdrawal (though there may be a minimum withdrawal amount).
It's worth bearing in mind though that taking money out of your stocks and shares ISA in the short term could stunt the growth of your investment. That's why it's usually best to only invest money you won't need access to for at least five years.