Steve Hardman, of the Cumberland Building Society

Last updated 14:21, Saturday, 29 March 2008

• Vist the Cumberland Building Society website

The safe option: Cash savings are a vital part of any savings portfolio as your capital is not at risk, so a cash ISA may be the preferred option

Whether you are looking for some “rainy day” money or for your longer-term financial goals, regular saving is important.

 An increasing number of us are now putting our savings into an ISA. Basically, an ISA is an investment which allows you to avoid income and capital gains tax on your money.

 There has been a huge increase in this form of investment in recent years due to some very attractive rates and the obvious tax advantages of using an ISA.

As a result, the total value of the country’s ISAs has surged from £29bn in April 2000 to £208bn.

The regulations which limit the amount of money you can invest in an ISA are due to change from April 6. Currently you can invest up to £3,000 each year in a cash Mini ISA and up to £4,000 in a stocks and shares Mini ISA or alternatively you could choose to invest up to £7,000 in a stocks and shares Maxi ISA.

From April 6 the cash ISA limit will be increased to £3,600 and the overall ISA limit, including stocks and shares ISAs will rise to £7,200 which is good news for savers.

If you are fortunate enough to have a lump sum to invest and are thinking of investing in an ISA, then get one soon.

You can still invest the maximum amount this tax year and add to it again once the new tax year starts on April 6.

If you don’t have a lump sum to invest then an ISA is still be a good way to build up a sizeable fund to meet your financial needs in the future.

Before deciding on your investment, consider your situation and take advice.

Research shows that a quarter of adults want to put money into investments but don’t know where to begin.

A family’s saving needs will be different to those of someone who is retired, younger people will tend to live for today but may also want to start longer-term savings for future goals like a house deposit.

But whatever your situation, there are a number of options available to you.

Cash savings are a vital part of any savings portfolio as your capital is not at risk and therefore a cash ISA may be the preferred option. However, if you are able to tie some money up for a medium to long term (five years plus) you could get better returns through a stocks and shares ISA which gives you access to a range of stock market based funds.

An ISA is an absolute must as part of any savings plan, not only can they offer security as well as growth, they protect your money from the taxman.

Whatever you do, make sure your money is working for nobody else but you.

• Steve Hardman is Financial Sales Controller at the Cumberland Building Society, which offers a financial planning service providing advice on a range of Norwich Union investment products as well as the Cumberland’s savings products.

• Visit the website at www.cumberland.co.uk
• This article should not be relied upon when making investment decisions. Always obtain financial advice.