As the start of the new tax year looms, ISAs really are all the rage. In a nutshell Individual Savings Accounts are little tax-free gift from the UK government, so you really should be making the most of them. Currently you can invest up to £15,240 a year, which will rise to £20,000 in April 2017/18.
Savers can choose to invest in either a cash or managed investment ISA, or split between the two. The question is, what’s the best option? We discuss the pros and cons of both…
A Cash ISA is considered in most cases as a basic savings account, with most high street banks offer several types. An instant access account gives you greater flexibility but offers a lower rate of interest, whilst fixed accounts promise a higher rate of return providing that you don’t touch the money for an agreed period of time.
Cash ISAs have been offering disappointing returns for several years now due to a trending all time low with the base interest rate – as such many savers are looking to Managed Stocks and Shares ISAs to boost their savings.
A Cash ISA protects your capital, which means you won’t lose any of the money you put in, but the trade-off for this security is a much slower pace of growth for your savings pot. Essentially you’ll be exposed to the risk of inflation, which can inevitably erode your moneys spending power.
To sum it up a Cash ISA is only a safer bet for short-term savers. If you foresee the need to access your money within the next couple of years – perhaps for an emergency or a holiday, then leaving your money in cash would be deemed as a more sensible option – think of it as a place to park your money.
Managed Stocks and Shares ISA
We’ve seen a huge surge in the number of savers turning to fully managed Stocks and Shares ISAs to boost their savings. A very different type of product to the Cash ISA, Managed ISAs are best described as a ‘wrapper’ rather than an account, protecting your returns from tax regardless of where it is invested. If your savings plan is long-term, investing you money in a diversified portfolio managed by an expert portfolio manager is the smartest option.
Designed to deliver much higher returns than cash ISAs, Managed ISAs do offer a higher level of risk, because if your chose but this can be very much tailored to your individual circumstances and your attitude to risk. Expert portfolio managers will seek value in the market to ensure you obtain the greatest returns possible for your investments.
It is however important to note, that unlike a cash ISA, any capital you put into a stocks and shares ISA is not protected and the value of your investments could go down as well as up. Your money does however have much more potential to grow over the long-term.
Speak to our expert team today to discuss if a Fully Managed ISA is suitable for you. Give us a call on 0207 416 6806.