STOCK MARKET INSTABILITY AND ISA MISCONCEPTIONS
In the current climate leading up to the end of the ISA subscription year and with falling stockmarkets, PIMA wishes to clarify some current misconceptions.
Peter Shipp, Chief Executive of PIMA said: "Naturally, investors may be nervous about making investments at a time when they feel the stock market may yet fall further. However, potential ISA investors are not forced into a corner by the current ISA regulations.
“We have seen some comments recently that suggest that investors can chose a cash-ISA until they are ready to invest in shares at a later date. It is very important that potential ISA investors understand that once subscription money has been placed in the cash component of an ISA, it cannot ever be moved to a stocks & shares component – even if both components are part of the same maxi ISA”.
*Anyone opening a stocks & shares ISA with a manager who offers a self-select option can make his subscription (£7,000 if he uses the maxi-ISA route) before the end of the tax year and then wait in cash until he is ready to invest.
*So long as this is done within a reasonable time, (measured in terms of months rather than days), the investor will be within the rules allowing cash to be held temporarily in a stocks & shares ISA. However, investors must be able to demonstrate that it is held for the purpose of buying qualifying investments (i.e. you cannot hold cash in this component indefinitely).
*Another option for investors would be to choose a manager who offers a "drip-feed" facility. Here investors have the comfort of spreading investment risk not only across a fund’s collective portfolio of investments but also by feeding the subscription into the fund in monthly slices so that the full £7,000 will have been invested within twelve months.