Stocks & Shares ISAs are becoming more popular as people increasingly ditch their cash holdings as returns from the banks are so minimal. It is not a good idea to ditch cash altogether – everyone needs some easy access to emergency funds – but if you are holding most of your savings in cash ISAs you are missing a trick.
An ISA is an ‘individual savings account’ – a type of wrapper that allows you to take advantage of tax breaks while you save or invest. There are different ISA options available and finding the best one for you is important. Your goals, budget, risk tolerance and capacity for loss are all important factors when considering your best ISA option and should be discussed with a financial adviser.
You have a £20,000 allowance that can be spread over a number of different ISA vehicles.
A Stocks & Shares ISA might be preferable if:
- you already have an emergency fund
- you have long-term goals and can wait for results
- you won’t need to access your money for at least three years
- you are willing to accept short-term losses for the chance of greater long-term growth
To help you here is a basic comparison:
| Cash ISA | Stocks & Shares ISA | |
| Who can open an ISA? | 16+
UK residents |
18+
UK residents |
| How much do you need to get started? | You can start saving with any amount of cash | You need enough to diversify your investments |
| How much can you save tax-free? | £20,000
In the 2019/2020 tax year |
£20,000
In the 2019/2020 tax year |
| What time period is it recommended for? | 1–3 years
Over longer periods inflation could erode the value of your savings |
3+ years
You need enough time to ride out market fluctuations |
| What is the potential for growth? | Very low
Low-interest rates mean you will get back about what you put in |
Low–very high
Different strategies have different growth potential |
| What is the level of risk? | Very low
You will only really lose money to fees or value to inflation |
Low–very high
There is always a risk you could get back less than you put in |
| How quickly can you access your money? | Instantly
Unless you lock money away in a fixed-rate ISA, usually for 1–5 years |
Within 10–15 days
But withdrawing at the wrong time could mean you get back less than you put in |
Redwood is one of the Souths’ leading Pensions, Investments, Wills, Trusts & Estate Planning providers and we are dedicated to helping families to grow, protect and enjoy their wealth. With our unrivalled knowledge of Estate Planning and Probate, we can advise on any situation. Join us at one of our Free Public Information Seminars: Book online Book Me A Place!, Call us on 01489877 547 or Email info@redwoodfinancial.co.uk to book a FREE Initial Meeting with us to review your financial planning needs.
