ISAs offer a rewarding saving platform

Individual savings accounts (ISA) are ideal products through which consumers can make their money work for them while protecting their future as they grow their nest eggs.

Since October 2009 people aged above 50 years have been able to invest up to £10,200 into these savings accounts and from April 6th 2010 the same benefits will be extended to the rest of the population.

Introduced in April 1999 ISAs are designed to give more value to consumers as they offer a tax-free wrapper into which people can place either cash or shares with the view of enjoying better rates.

Ideal for anyone with savings or investments, the products work by saving on tax and as a result increase returns.

Consumers can choose from a variety of ISAs on the market ranging from those giving instant access and fixed-rates to accounts that offer base rate guarantees.

There are various ways to work with ISAs as consumers can use the maximum cash allowance, divide it equally between shares and cash or opt for an all-shares arrangement, although this means there will be no room for tax-free cash savings.

One of the advantages of ISA's is there is no set length of time savers have to wait before reaping the tax-free benefits as consumers can have full, instant access without being penalised.

In response to the government's October increase in ISA allowances, investors more than doubled lump sum contributions to share-based products, according to Virgin Money.

The greatest activity was recorded in income funds, which saw contributions increase by around 130 per cent between October 6th last year and the beginning of January 2010, analysis by the organisation showed.

According to figures from the Investment Management Association, the products are appealing to an increasing number of consumers, which is helping boost the amount of money invested in them.

In the 11 months to November 30th 2009, a record net £23.6 billion was invested in retail fund sales, which represents an increase of more than ten times the amount devoted over the same period of 2008.

"The decision by Chancellor Alistair Darling to increase the ISA threshold to £10,200 for the over 50s has been very popular," explained Grant Bather, spokesman at Virgin Money.

"With the ISA allowance of £10,200 to be extended to all savers in the new tax year we would urge all investors to consider making the most of the increase in the tax efficient allowance."

However, financial information provider Moneyfacts.co.uk warned that investors would see better value in a taxed savings account because many providers are paying out very low rates for ISAs.

It is wise for savers to take a long-term view when it comes to ISA rates, according to Andrew Hagger of Moneynet, who explained that the low rates are a seasonal condition linked to the approach of a new tax year.