The start of the new tax year is fast approaching, and that means you need to make sure you'll use your ISA allowance in time. But it's also worth thinking about how you'll allocate your funds, and whether it's time to consider stocks & shares…
According to research from investment managers BlackRock, just 18% of those surveyed hold stocks & shares in their ISAs, compared with 43% who have ISAs that are purely cash-based. A further 37% don't hold an ISA at all, meaning a large number of savers are missing out on significant tax advantages.
Even those who save in cash could have effectively lost out. BlackRock's analysis revealed that cash has lost almost 30% of its real value in the past 10 years due to inflation, and even those who had found the best cash ISA rates will have made a loss of 6% in real terms.
Many savers have long-term goals – 39% of respondents intend to use their ISA savings to fund their retirement while 27% are planning to build up their long-term wealth using it – but the poor performance of cash means their eventual returns may not be as impressive as they were hoping for. So, why not look to the alternative?
The flexibilities introduced in last year's Budget mean there's good reason to consider stocks & shares. You're now able to move any savings held in a stocks & shares ISA back to cash should you wish, so it won't be a decision you can't undo later, and some providers even offer the chance to hold both cash and stocks & shares in the same place. If you can, splitting your savings between the safety of cash ISAs and stocks & shares is an ideal way to start investing in this market – your risk will be spread and you still have the safety net of cash to keep some of your savings intact.
And the returns could be worth it. Research by Moneyfacts revealed that stocks & shares ISAs have shown growth in 10 out of the 16 years that they have been in existence, with consistent growth being recorded in the last three years. While past performance doesn't necessarily predict future growth, it does mean that there is the potential to secure some promising returns on your hard-earned cash.
"Britons must realise the risks of holding their ISAs in cash," commented Alex Hoctor-Duncan of BlackRock. "While the prospect of financial planning is not exciting to all, people should carefully explore the options available for their ISAs. Dipping your toes into the markets can make a big difference in the long run."
So, why don't you give some thought to stocks & shares ISAs? You can take a look at some of the options available by checking out our stocks & shares ISAs page.
Check out some of the stocks & shares ISA options
Learn more about stocks & shares ISAs with our guide
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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