ISAs are relatively new. They were introduced in 1999 and since then have become a key asset for savers and investors alike. Before ISAs were introduced, pensions were the primary vehicle for building savings for many.
In general, the ISAs available have improved over the past two decades. For example, the annual allowance for a Stocks and Shares ISA has increased from £7,000 to £20,000 since 1999. If the allowance had increased in line with inflation, then the allowance would only be £11,200.
Recently, however, Cash ISAs have been suffering poor interest rates, currently only offering a maximum of 1.5% on easy access ISAs and 2.3% on fixed rate ISAs. For those who are not comfortable with risk, a cash ISA is still an ideal option. You are always guaranteed to get back the money you put in.
Where is your money?
If you have shoved your money in a Cash ISA with the hope of it blooming into a lovely little money tree, it may be worth checking your rates!
You may find that the rates on your Cash ISA just aren’t working for you anymore. This means it is probably time to reconsider your options.
In cases where you do not need instant access to the money in your ISA, like saving toward retirement, moving your money into a Stocks and Shares ISA could be far more profitable for you. If you have the time to invest in your money, the returns you see could help to grow the money in your pot.
Stocks and Shares ISAs: Worth the investment?
A Stocks and Shares ISA is different from a Cash ISA. It is an investment rather than a savings account. Investing, as I’m sure you all know, comes with risk. But it can also come with very lucrative returns.
These particular ISAs invest your money across your choice of funds in the stock market. Your attitude to risk will influence how you invest.
Stocks and Shares ISAs work as hard for you as you want them to. Especially great for those of you who like to be in total control. The higher the risk, the higher the potential for returns (and the potential for loss!).
Within a Stocks and Shares ISA it is usually a good idea to invest across a range of asset classes. Shares, bonds, property and cash, for example. This helps to spread your risk. Where you invest your money will reflect your attitude to risk.
There are a number of types of fund that you could put within your Stocks and Shares ISAs:
- Corporate bonds
- Government bonds
Income vs growth
When investing in a Stocks and Shares ISA, it is important to keep your goal in mind. Some may invest with the hope of generating income. Some want to grow their initial investment.
What are the benefits of investing in a Stocks and Shares ISA?
Apart from the obvious potential for great returns, there are tax benefits to investing in a Stocks and Shares ISA.
The dividends you receive on shares within your ISA are tax-free. They will not count towards your £2,000 tax-free Dividend allowance either.
In addition, any profit you make on your investment is exempt from Capital Gains Tax (CGT). This makes a Stocks and Shares ISA an appealing option if you do, or are likely to, exceed your £12,000 CGT limit.
There are plenty of options for you to set up your own Stocks and Shares ISA. Seeking professional advice before investing, however, will always be the smart thing to do.
If you have more to invest or would like an even more personalised portfolio, get in touch. Here at GreenSky we don’t believe in a one-size-fits-all approach. We can help build the investment portfolio that is right for you. Find out more or contact us today.
Don’t forget to take into account the costs related to investing in a Stocks and Shares ISA.