Changes are coming to the ISA market. In less than a week's time the amount you'll be allowed to save tax-free will rise to £15,000, and that's a whole lot more money you'll be able to keep out of the taxman's reach. But will you be making the most of it?
According to research from HSBC, around 42% of regular savers will. They're actively intending to save more when the new rules come into effect, however cash is still king, with 21% planning to save more into a cash ISA while just 7% will do the same with a stocks and shares version. A further 14% want to hedge their bets and save more across both categories, offering the combination of security and the potential for higher returns – the best of both worlds.
Stocks and shares should always be treated as a more high-risk investment, and it's this that perhaps accounts for the lower uptake of this form of investing. HSBC found that 46% of those who have an ISA don't use any of their stocks and shares allowance, while additional research from Standard Life has found that 28% of adults want to build up an emergency fund before they commit to stock market investing.
It can't be denied that this is a sensible option. According to the figures, the typical Brit said they'd want to build up £7,499 in their emergency fund before they'd feel comfortable putting money into a stocks and shares ISA, with only 4% of those surveyed saying they'd happily opt for equity investing with no cash savings as a buffer.
It's always a good idea to have a rainy day fund for life's emergencies, ideally in an easy access ISA so you can withdraw the cash when the need arises. Once you've got that buffer, however, it could be a great opportunity to try your hand at stocks and shares saving too.
Not only does the higher allowance mean you can build up a great tax-free emergency fund, but you could well have a bit left over to invest in stocks and shares for added tax efficiency. And, with the new rules meaning stock market investments can be moved back into cash should you change your mind, it could be a great time to test the water – why not find out more about stocks and shares ISAs to see if they could be for you?
No matter which version you opt for, however, it's important you understand what the upcoming changes actually mean – because according to TD Invest, 77% of those surveyed had little or no understanding of the new rules that are coming into play. The confusion probably isn't helped by all the names floating around. New ISA, NISA, super ISA… they're actually all the same thing, with the key changes simply being the new £15,000 limit and the increased flexibility. Read our guides to find out more, but no matter what you choose to call it, you need to make sure you make the most of it. So, will you?
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