Prudential ISA (A review)

In this brief guide, we are going to be discussing the Prudential ISA.

In this post, we are going to introduce you to the world of the Prudential ISAs, their best use case and all you need to know about the specific ISAs.e.g which one can help you get on the property ladder or help you save for retirement.

What is the Prudential ISA?

The  Prudential ISA(Individual savings account) is a tax-effective way to save. ISAs allow you to pay no tax or the minimum tax on the interest you make on your savings.

To be eligible for an ISA you will usually have to be:

• You must be at least 16 years old
• You must be a UK resident
• And you must have not subscribed to another UK ISA in the same category in the same tax year

So, you are probably wondering what does “subscribing to an ISA” mean. Subscribing to an ISA means paying into and opening an ISA. You are allowed to subscribe to one of each type of ISA every tax year and you must not exceed your ISA allowance each tax year.

How Many ISAs Can I have?💶🙌🏻

The current tax rules allow you to have or open one of each type of ISA every year but you can only put the maximum tax year ISA allowance in all of these ISAs. This means your combined savings in all your ISA accounts must not exceed your current tax year ISA allowance for the current year. The tax year ISA allowance is currently £20,000.

Can I open a cash ISA AND A LISA in the same year?

Yes, you can open a cash ISA and a LISA in the same year. You can also contribute to a cash ISA and LISA in the same year as long as you don’t go over your personal ISA allowance. You can out whatever you have left in other ISA accounts in the same tax year.

How many Prudential ISAs can you open in one year?🔔❄

You can have multiple Prudential ISAs but not more than one of the same( e.g you can’t have two Prudential cash ISAs)   and your total Tax year ISA allowance must not be exceeded in your combined ISA contributions. This means ISAs you hold with Prudential and ISAs you hold with other providers. Each ISA may also have its maximum contribution limit as well. So check the terms.

What to do if you open more than one type of Prudential ISA?😮ℹ

Although it is very unlikely, if you mistakenly open more than one lifetime or stocks & shares ISA in a single tax year, you should notify your Prudential ISA manager at the earliest opportunity. In some cases, the ISA may be allowed to remain open, once you have consulted with HM Revenue and Customs.

The rules for stocks and shares ISAs are the same as with cash ISAs. You can only pay into one each tax year but can open a new ISA with a different platform each year if you wish to. This means you may be able to further diversify by having one type of Prudential ISA and opening the same type of ISA with a different provider in the next tax year. Contribution rules will still apply.

If you have multiple stocks and shares Isas open, you are only allowed to pay into one of them in each tax year. So, if you only wanted to invest a portion of your Isa allowance via the second Isa provider, this could be difficult as it will mean you are not able to add any new money to the original Isa in the same tax year.

The only other option to consider is transferring your existing portfolio to the other provider, although this might incur some costs.

How do ISA transfers work?🌟✈

ISAs are tax-free saving wrappers and moving them to get a better deal is common. If you move your ISA in the wrong way you could just end up losing your tax-free status and costing you interest made from your ISA. If you want to move your ISA to a Prudential ISA you should contact the Prudential ISA manager.

Why should you transfer your ISA?🌈ℹ

You could transfer your ISA for a variety of reasons such as getting a better rate or because of reasons such as the cost of your current ISA manager or their performance.

You might also be transferring all your ISAs to a new manager to have all your savings in one place or rather move all your savings to different places in a scenario where your combined savings are over the financial services compensation scheme limit of £85,000 per account.

There are a variety of ISA providers out there and you can view their various offerings, including the way they invest, their past returns etc all online so you have an idea of which provider you want to move your money to.

To transfer an ISA you simply open a new ISA account(in this case a Prudential ISA ) then fill an ISA transfer form and send to your old ISA manager. It’s that simple. Once the transfer is done you will get a closure statement showing exactly how much you have transferred.

Be sure to be on the lookout for any charges or transfer out fees imposed by your current ISA manager.

How long does your ISA transfer take?👀

This depends on what ISAs you are transferring. If you are transferring a cash ISA then this should take 15 days. If you are transferring a stock and shares ISA then this will usually take 30 days.

If your ISA transfer takes too long you can report it to the Financial ombudsman.

Which ISAs can you transfer?❄⌛

You can transfer any ISA although there might be some penalty for ISAs which are fixed-term or notice ISAs. Some ISA providers do not accept ISA transfers.

If you have a notice ISA, it is probably best to give notice to your current ISA provider to avoid any charges.

If you choose to proceed without giving notice then you should compare how much interest the new ISA will earn you and the cost of the penalty. If you still make more money by transferring your ISA then, by all means, transfer your ISA if you wish.

The Prudential ISA is covered by the financial services compensation scheme. This means you are covered by up to £85,000 per account in case anything goes wrong with your Prudential ISA.

The Prudential ISA is a stocks and shares ISA.

What are stock and share ISAs and how do they work?

A stocks and share ISA is like an investment account where your ISA contributions are invested in company shares and stocks. The stocks and share ISA is one of the main types of ISA. There is no tax on interest made or on dividends earned. Your stock and shares ISA can also be used to invest in different investment vehicles such as unit trusts, open-ended investment companies (Oeics) and investment trusts, as well as government bonds and corporate bonds.

What tax is due on stock and shares ISAs?🤑🏠

Capital Gains tax may be due if you exceed your annual capital gains tax allowance which is currently £11,700.

Capital gains tax is the tax you have to pay when you sell a property investment, shares or jewellery. If you buy your shares are a value of £5000 and sell them for £10,000 you might have to pay Capital Gains Tax on the £5000 profit but this is only if you exceed your capital gains tax allowance.

Dividends held in a stocks and shares ISA are also tax-free. Dividends are another means of generating a return from your investment. When a company makes a profit they may pay a dividend to its shareholders. Typically we all have a yearly dividend tax allowance of £2,000 but if we exceed this then you will pay tax on it based on our current tax band.

This currently stands at 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional rate taxpayers.

Some stocks and shares ISA will invest in corporate bonds. This is when your contributions are lent to businesses for a fixed rate of return. Rather than investing in the companies by owning stocks which can appreciate in value you simply loan the business money for a fixed term and they repay you your capital at the end of the term as well as monthly interest repayments.

If you invest in corporate bonds via your stocks and shares ISA or any type of ISA then you will not be due any tax on interest earned from corporate bonds.

If you’re investing in corporate or Government bonds outside a stocks & shares ISA, it’ll fall under the remit of the personal savings allowance which gives you £1000 tax-free depending on your tax band. This means basic-rate (20%) taxpayers will be able to earn £1,000 interest with no tax while higher-rate (40%) taxpayers – will be able to earn £500 interest with no tax. Additional rate (45%) taxpayers don’t get a tax-free allowance.

This allowance also covers your normal savings interest in a bank as well as other forms of interest. As with the dividend allowance, you’ll owe tax on any interest earned above its limit.

Stocks and shares ISA are inherently different from Cash ISAs because Cash ISAs are when your funds are deployed in a savings account and interest is paid on your contributions. Stocks and shares ISA are a more risky type of ISA and the value of your contributions can go up or down as they are invested in companies which performances can change due to a number of factors such as business cycle, economic climate or political influences.

How do you open a stocks and shares ISA?✔🚩

Stocks and shares ISAs can be found through a variety of platforms. Some platforms will charge a fee. You will also have to then choose which stocks and shares ISA funds to buy. Th fund manager will also charge you a fee. Some fund managers will manage the whole process and decide what funds to invest your money for you.

What fees are involved with Stocks and Shares ISA?

Both the platform and the funds you invest in will cost you money. The main fees to look out for are:

Platform charge.

This is the charge for being able to access your funds. This can either be a flat fee or a percentage of the funds value.

Fund manager charge (also known as annual management charge).

The fund managers of the funds you buy will also charge you a fee.This is always a percentage and can typically vary from 0.1% – 1% per fund, depending on which fund you’re investing in.

Selling/buying funds.

This is the cost every time you buy or sell a fund on the platform. These can be anything from £0 to £25. So if you’re an active trader, looking for low trading charges should be a high priority.

Transfer out fee.

The cost involved in moving your stocks & shares ISA from one platform (provider) to another. This is usually charged per fund, so the more funds you have within your stocks & shares ISA, the more it will cost you. However, some platforms don’t charge a fee for transferring out.

Not sure what all the fuss about? You can use platforms that manage investment decisions for you. All you simply have to do is answer a few questions, select your risk profiles, targets and contribute your investments in one lump sum or monthly.

Stocks and shares ISA are covered by the financial services compensation scheme up to £50,000.

As with all investing, your capital is at risk. Tax rules may change in the future. If you are unsure if a Stocks and Shares ISA is the right choice for you, please seek independent financial advice

What you need to know about the prudential ISA?

The Prudential ISA is a Stocks and Shares ISA which is provided by Link Financial Investments Limited, who is the ISA Plan Manager. Link Financial Investments Limited is responsible for all regulatory and legal aspects of the ISA and provision of all customer services. This means the Prudential ISA is just a brand name but everything in regards to the Prudential ISA is managed by Link financial investments.

You can start your investment from as little as £50 each month or with a single lump sum of £500. The minimum top-up payment is £250. The

There is no minimum investment term and you can adjust when you make monthly payments, if you make monthly payments and how much you make. If you want to add to your monthly payments it must be at least £5 extra per month.

According to the Prudential ISA website, it has two elements:

“Investment in a life insurance policy which allows access to the PruFund Funds (the Life Insurance Policy) for which Prudential is responsible

Investment in Open-Ended Investment Company (OEIC) funds for which Link Fund Solutions Limited are responsible”

You can invest in one or both elements as part of your prudential ISA.

Eligibility for the prudential ISA

You need to be at least 18 years of age to be eligible for the prudential ISA.

Any owner must be at least 18 or over. There is no maximum age limit.

How to contribute to your prudential ISA

You need to make an initial payment of £500 for every prudential ISA fund which you want to invest in.

The minimum you can top up afterwards is £250. You will also need to make at least £50 per month in fund contributions if you choose to make fund contributions.

How can you Withdrawal from the Prudential ISA?

You can withdraw your money from the prudential ISA by choosing to take regular withdrawals each month, year, half-year or quarterly. The mini you can withdraw is £50. Yu can also take partial withdrawals but this require a minimum of £250.

You can also withdraw all your money from the prudential ISA but this will mean you are closing the Prudential ISA account.

According to the Prudential ISA website “the maximum aggregate value of withdrawals in a 12 month period must not be more than 7.5% of the full value of your  eligible holdings.” 

Investment options with the Prudential ISA

Below are the list of funds available through the Prudential ISA.

PruFund range of funds   

LF Prudential OEIC Fund range

The PruFund range of funds

The Prudential ISA  also offers a PruFund range of funds 

PruFund Risk Managed 1 Fund

PruFund Risk Managed 2 Fund

PruFund Risk Managed 3 Fund

PruFund Risk Managed 4 Fund

PruFund Risk Managed 5 Fund

PruFund Cautious Fund

PruFund Growth Fund

At the beginning of each quarter, Prudential ISA will announce the expected growth rates for their range of Prufunds.

The Prudential ISA also offers a range of LF Prudential OEIC Funds

These funds can either be passive (5) or active (5) and pool your funds with funds from other investors.

Risk Managed Active Range

LF Prudential Risk Managed Active 1 Fund

LF Prudential Risk Managed Active 2 Fund

LF Prudential Risk Managed Active 3 Fund

LF Prudential Risk Managed Active 4 Fund

LF Prudential Risk Managed Active 5 Fund

Find out more about the Risk Managed Active Range.

Risk Managed Passive Range

LF Prudential Risk Managed Passive 1 Fund

LF Prudential Risk Managed Passive 2 Fund

LF Prudential Risk Managed Passive 3 Fund

LF Prudential Risk Managed Passive 4 Fund

LF Prudential Risk Managed Passive 5 Fund

Find out more about the Risk Managed Passive Range.

Switching your Prudential ISA fund

If you are concerned about a particular fund and want to switch then you can switch at any time without any charge to you.

Prudential ISA costs

Charges and costs

The main charges will be:

Annual Management Charges (AMC)

Fund switching charges

Adviser Charges

Annual Management Charge

Annual Management Charges (AMC) applies for each fund. 

For more detailed information in regards to the charges and costs of the Prudential ISA, please see here.

You can also see the key facts about the prudential ISA here.

Features and benefits of the Prudential ISA

The prudential ISA is a tax efficient way for you to grow your income and at the same time avoid paying capital gains tax due to using the stock and shares tax-free ISA wrapper.

The Prudential ISA will also give you access to Prudential’s PruFund range of funds.

You will get access to a number of  OEIC funds which will offer you different investment risks and may fit your investment plans.

With the Prudential ISA you will also have regular access to your money with one-off withdrawals.

The Prudential ISA does not force you to invest a lot. You can invest as little as £50 per month and start with a minimum lump sum of £500.

You can also transfer any existing ISAs you may have with other ISA providers into your prudential ISA. This can be either cash ISAs or stock and shares ISAs.

The Prudential ISA doesn’t have any fixed term, this means you can invest in it for as long as you want and as long as it remains open.

Risks of the Prudential ISA

As with all investments, the prudential ISA has some risk attached to it and you should consider these risks before making an investment decision.

The value of your investments can go up or down and past performance should not be taken as an indicator when looking to invest into the prudential ISA.

 The prudential ISA invests in stocks and shares of companies a well as other assets and thenrisk here is varying and could be great. You can find more information on each exact type of investment option from the Prufund fund and the different LF OEICs on the investor documents your adviser should have given to you.

 For any fund, Prudential may delay the buying, selling or switching of any investment. You will be told if this applies to your fund.

 In the event that the PruFund Funds might be closed to new investment, wound-up or that Link Financial Investments might cease to act as the Prudential ISA plan manager, you may be forced to accept a cash withdrawal equal to the value of you current investments. This means you may get less than you initially put into the fund.

How to contact the Prudential ISA

As the Prudential ISA is managed by LInk investments you can contact link investments for any queries relating to the Prudential ISA.

How to contact Link

Write to Link at:

Link Financial Investments Limited

PO Box 384

Darlington

DL1 9RZ

Phone Link on: 0344 335 8936, 8:30am to 5:30pm

Monday to Friday (excluding Bank Holidays)

Email the Link Customer Services team at:

investorservices@linkgroup.co.uk

The information provided on this page about the Prudential ISA is accurate at the time of writing. You should check with the Prudential ISA website as some of the information on this page may have changed. If you have any questions or comments please let us know below.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.