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Cumberland and Westmorland Herald
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    Donald Campbell’s Bluebird to return to Ullswater

    Donald Campbell’s Bluebird to return to Ullswater

    Eden man shares his memories of VE Day, 1945

    Eden man shares his memories of VE Day, 1945

    Joan marks 100th birthday with special party

    Joan marks 100th birthday with special party

    Eden couple celebrate diamond anniversary

    Eden couple celebrate diamond anniversary

    Rethink your password in light of recent cyber attacks

    Rethink your password in light of recent cyber attacks

    Couple giving new life to outdoors kit in Penrith

    Couple giving new life to outdoors kit in Penrith

    Fears Tebay to be ‘cut off like an island’ during months of bridge works

    Fears Tebay to be ‘cut off like an island’ during months of bridge works

    Thieves ransack treasured Penrith garden

    Thieves ransack treasured Penrith garden

    Lake District community saves village shop

    Lake District community saves village shop

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    Darren Edmondson leaves Penrith AFC

    Darren Edmondson leaves Penrith AFC

    Lucy plays key role in county T20 triumph

    Lucy plays key role in county T20 triumph

    Gold for Keith in annual festival of orienteering

    Gold for Keith in annual festival of orienteering

    Cumberland and Westmorland wrestlers head to European championships

    Cumberland and Westmorland wrestlers head to European championships

    Kirkby Stephen Hockey Club win league title

    Kirkby Stephen Hockey Club win league title

    Dedicated Eden football volunteer wins major award

    Dedicated Eden football volunteer wins major award

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    10-year-old footballer Casper Ostrowski snapped up by Morecambe

    Kirkby Stephen U18s win bronze at national hockey championships

    Kirkby Stephen U18s win bronze at national hockey championships

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    Penrith swimmer inducted into Cumbria hall of fame

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Are you invested in the wrong type of ISA?

by CWH
12 November 2021
in Sponsored
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Justin Rourke, of Armstrong Watson

One of the many knock-on effects of the pandemic has been that HMRC’s annual updating of statistics has suffered delays.

As a result, details of ISA subscriptions and holdings for 2019/20 have only just emerged.

New statistics from HMRC show that a total of more than £300bn is currently invested in cash ISAs.

Among many interesting facts, the data shows:

  • Despite ultra-low interest rates, the amount of money invested in cash ISAs has continued to grow. In 2019/20, £48.75 billion of subscriptions were received, more than twice as much as was invested in stocks and shares ISAs.
  • The increase in the maximum overall ISA contribution to £20,000 in 2017/18 (from £15,240) has still not driven total annual subscriptions above their 2014/15 peak.
  • Lifetime ISAs (LISAs), launched in 2017/18 to no great fanfare, have since grown in popularity, with 2019/20 subscriptions more than double those of the previous year.
  • This jump may have been helped by the closure to new investors of the Help to Buy ISA in December 2019.
  • For the first time, more than one million subscriptions were made to Junior ISAs (JISAs) in 2019/20, with total investment of £974 million.
  • The total amount invested in ISAs (excluding JISAs) in April 2020 was just under £620 billion, of which just over half was held in cash ISAs. The cash proportion would likely be substantially smaller today, as the value of stocks and shares ISAs were depressed in April 2020 when the first lockdowns got underway.

The continued dominance of cash ISAs is, at least in part, a reflection of “doing it yourself” by many ISA investors.

The personal savings allowance, introduced in 2016/17, means that basic rate taxpayers (calculated using UK-wide rates) pay no tax on their first £1,000 of interest earned, using the example of a deposit account, and, similarly, £500 of interest is tax-free for higher rate taxpayers.

At current interest rates, it takes a considerable amount of capital to exceed even the lower threshold so taking out a cash ISA could be of questionable value compared with an ordinary deposit, which might pay a higher interest rate.

However the ISA framework could be useful to you in other ways.

Speaking with an independent financial adviser can help you make the right decision on where to put your savings.

In addition to The Financial Services Compensation Scheme (FSCS) offering individual account holders protection up to £85,000 (£170,000 for joint holdings), inflation remains the real risk to investors.

The current rising inflation environment represents a real challenge to savers who must, at the very least, aim to beat inflation to prevent their money from
losing value in real terms.

The challenge is made trickier by the fact that current savings rates represent poor value and there are now very few accounts that can even beat inflation.

So how can cash savers hope to bridge the gap?

The answer may be to invest into ‘real assets’ such as shares, fixed interest and property.

But is this a good time to invest? It`s all too easy to get caught up with the bad news we hear about in financial markets.

At the start of the pandemic, markets fell sharply but have generally recovered well to this point as a result of economies reopening.

However, the key factor is not about when to invest but rather the amount of time you invest for.

Many people believe that knowing when to buy and when to sell is the secret of successful investing.

The truth is that no one knows with any certainty when investment markets will rise or fall.

Trying to time the investment markets is not only stressful, it is very seldom successful.

Leaving funds invested for the medium to longer-term usually produces the best returns.

When markets are volatile there can be a temptation to put all your investments in the relative security of cash.

It may seem like a safe haven, however, as they say, ‘a ship is safe in harbour, but that is not what ships are built for’.

We have produced Our Guide To Investing to help you understand, whatever your knowledge and experience, the principles of investing to allow you to make informed savings and investment decisions.

You can download the guide on our website.

Armstrong Watson Financial Planning & Wealth Management, as well as providing Independent Financial Advice and personalised investment planning, offers a bespoke cash management service aimed at maximising interest rates by identifying the most competitive cash accounts, whilst also
ensuring clients’ savings are afforded full FSCS protection.

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