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Long-term goals? Stocks & shares ISAs could help

Long-term goals? Stocks & shares ISAs could help

Category: ISAs

Updated: 15/10/2015
First Published: 15/10/2015

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This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

If you've got a long-term savings goal – such as saving for retirement – just what are you doing to achieve it? Hopefully you'll be carefully squirreling away some of your hard-earned cash each month, but to really benefit, it all comes down to where you put it. What about stocks & shares ISAs?

Potential for returns

Those with long-term savings goals will have to think a bit differently to those saving for the short term, because here, future growth is key. Research from Aviva found that 8% of respondents who are saving for retirement still keep some of their savings as cash – something that's never ideal for such a long-term outlook – while 29% used a workplace pension, 20% used a cash ISA, and 18% used another kind of savings account.

A workplace pension will of course be ideal, but if you want to build up an additional savings pot for retirement, traditional savings accounts may not be that suitable. This is quite simply because the returns on offer can pale in comparison to those that can be achieved by investing in an alternative, such as a stocks & shares ISA.

This kind of saving will only be suitable for those who have a higher risk appetite and a truly long-term view, but the eventual returns could be worth it. There's no set interest rate as the returns you achieve are based on the stock market performance of the funds you're invested in, and it's for this reason that the returns have the potential to be so much higher.

Rodney Prezeau of Aviva explains: "To put this in context, £100 invested 20 years ago in a 90-day notice savings account would be worth £188 today. But if £100 had been invested in the FTSE All Share index instead, it would have generated £371. This illustrates how, over the long term, investing in shares can help money to keep pace with – and even beat – inflation."

Worth considering?

As you can see, the kind of returns on offer could make this kind of savings vehicle a viable solution for some people, and if you carefully invest a small amount each month it could easily build up to a substantial pot over a decade or two.

However, stocks & shares ISAs won't be right for everyone. There's a far greater level of risk involved and the value of your investments could fall as well as rise, and there's even the potential for you to end up with less than you put in. However, for those comfortable with that kind of risk, and the long-term nature of stocks & shares ISAs, they could be worth considering – read our guide to find out more about them, and see if they could help you meet your long-term goal.

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