Cash ISAs

April 6, 2018

  • ISAs are a great way to save, whether for a rainy day or towards a special event, like your wedding or buying a home.

  • There are different types of ISAs: Cash ISAs, Innovative Finance ISAs and Stocks & Shares ISAs, each with different risks and therefore potential returns

  • Currently, you’re allowed to save and invest up to £20,000 each tax year into these ISAs. You can split your annual limit across the types of ISAs in whatever proportion you like

  • You can open ISAs with companies that provide them. Some of them are covered by the FSCS – which protects your savings up to a limit if they go bust (85k for Cash ISAs). Find out first if the ISA provider is covered by the FSCS before taking out an ISA with them

  • You’re not tied in to these companies. You can always move your savings to another if you’re not happy with the service you’re getting, or if somewhere else is offering a better rate of interest or greater selection of products. 

  • Shop around, use comparison websites when looking for the best rates (they're a good starting point for Cash ISAs)

 

 

The cash you put into your ISA, which has been provided by your bank or a provider that is regulated, is protected by the Financial Services Compensation Scheme (FSCS). That means they guarantee your money if the bank or ISA provider goes bust, up to £85,000.

 

Cash ISAs are a good option for saving if:

1. You want to earn tax-free interest on your savings

2. Are over 16 years of age

3. Resident in the UK

 

You can only open one Cash ISA each year.

 

 

 

Risk/Return

  • Not all Cash ISAs offer great interest rates. Shop around until you find a good deal.

  • Beware of teaser rates that are high for a short period of time before dropping off to a low level. If you find that you’re no longer earning a competitive interest rate, look for a higher rate Cash ISA to switch (transfer) into.

  • Beware of fixed-term cash ISAs offering very high interest rates. In these ISAs you are taking a gamble on the performance of an index, like the FTSE100 (index of biggest 100 companies in the UK) or a commodity price (like the price of oil or gold). You may get no income or capital growth (growth of your money), and charges may be deducted from your capital as returns on your investment can be dependent on a number of rules.

 

 

If you want to compare rates available on Cash ISAs, a good place to start is comparison websites like www.moneysupermarket.com. You can also find more information on Cash ISAs at www.moneyadviceservice.org.uk and http://www.moneysavingexpert.com