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Best ISA Rates for Over 60s

ISAs are some of the most popular savings vehicles here in the UK, and finding the best ISA rates for over 60s is something that could be of prime importance to many as they contemplate their retirements. But first, let’s recap what an ISA is, which will help explain its popularity.

Can I invest in an ISA by myself?Yes, you can, but you must be experienced
How to find the best ISA provider?Find a provider who offers the best ISA rates for over 60s. The lowest-cost option might not be the best one for you
Some important aspects to compare?Number of funds available
How much does the platform charge
Transfer out fees
Account closure fee
Fund dealing charges
Ease of use
Can ISAs be passed on via inheritance?Yes, they can

The acronym ISA stands for Individual Savings Account. This type of savings account was first introduced in 1999 by the then Chancellor of the Exchequer, Gordon Brown. Hailed as offering tax-free interest payments, their overall tax-free status is the reason ISAs have become such popular vehicles for saving and investing. But is there an ISA for over 60s? Let’s find out.

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The five different types of ISAs

When ISAs were launched, the ISA allowance was £7,000 per annum. Over the years, the allowance has increased, and in the current 2023/2024 tax year, that allowance is £20,000.

There are five different types of ISA.

  • Cash ISA
  • Innovative Finance ISA
  • Junior ISA
  • Lifetime ISA
  • Stocks and Shares ISA, or Investment ISA

The best ISA rates for over 60s are normally found with Lifetime, and Stocks and Shares ISAs. Let’s address the best Cash ISA rates for over 60s UK citizens.

The Cash ISA

Cash ISAs, sometimes referred to as NISAs, currently allow account holders resident in the UK aged 16 and upwards to save up to £20,000 per annum tax-free. Some NISAs permit instant access to your savings and have variable interest rates. From April 2024, the minimum age at which you can start a Cash ISA will rise to 18.

The term “NISA” stands for “New ISA,” and it was an initiative first announced by the UK government in the 2014 budget as a new, simpler ISA product, allowing equal limits (£15,000 per tax year at that time), for both Cash and Stocks and Shares ISAs.

After the government introduced the personal savings allowance (PSA) in 2016, it took some of the shine away from Cash ISAs. It meant that if you were a basic rate taxpayer, you could pay into a regular bank or building society savings account with easy access to your money and not have to pay income tax on the first £1,000 worth of interest your savings earn. For higher-rate taxpayers, the PSA cap is reduced to £500 per tax year, and for additional rate payers, it is zero.

The PSA doesn’t apply to ISAs because they have their own £20K ISA annual allowance. You can also get fixed-rate cash ISAs, as well as easy-access Cash ISAs, but you must be prepared to wait the agreed notice period before being able to access your funds.

The truth is that when putting money into even the very best Cash ISAs for over 60s, you’ll find that they are not great compared to the best ISA rates for over 60s UK residents with Stocks and Shares ISAs.

Now, let’s take a quick look at the Lifetime ISA.

Lifetime ISA

The Lifetime ISA, or LISA for short, is available to anyone between the ages of 18 and 39. It is attractive for potential homeowners as account holders can save up to £4,000 per annum toward their first home. The state adds a 25% annual bonus after one year. It is paid each year you save something into your LISA until you reach the age of 50.

In theory, if you started a LISA when you were 18 and saved a maximum of £4,000 every year, your bonus would amount to £33,000. The only thing to remember is that if you withdraw some savings and don’t use them to buy a property, you will forfeit 25% as a penalty.

Clearly, Lifetime ISA is aimed at those who want to get a foot on the property ladder, and they are quite attractive from that point of view. For the over 60s, though, unless you are a late starter when it comes to buying a home, they don’t really cut the mustard.

Will the LISA reforms suggested by Martin Lewis affect the best ISA rates for over 60s? Yes, but only if Jeremy Hunt agrees to Lewis’s suggestion to reduce 25% penalty fee, down to 20%.

The drawback with both Cash and Lifetime ISA when looking for the best ISA rates for over 60s is that their interest rates are on the low side and don’t count among Martin Lewis’s best ISA rates, which is why many tend to choose Stocks and Shares ISAs instead. Lewis also suggests that if you are one of the savers not paying tax on your savings interest, cash ISAs have no benefit.

The Stocks and Shares (Investment) ISA

Stocks and Shares ISAs are renowned for paying significantly higher interest rates on savings than their Cash or Lifetime ISA cousins, and therefore, potentially offer the best ISA rates for over 60’s.

However, the downside is that there is a certain element of risk. You could lose some or all your savings. But how worried should you be?

Why put money into an investment ISA for over 60s?

Evidence suggests that investments usually perform better than cash over the long term. According to data from Berkshire Hathaway, the compounded annual return on the S&P 500 with dividends included from 1965-2022 was 9.9%. The S&P 500 recorded an average return of 12.39% over the last 10 years. This is a good indication of the potential performance of the best savings accounts for over 60s and other age groups, too.

The three occasions where investments underperformed were during periods of financial crisis. So, the risk is there, and it is real, but it needs to be put into perspective. The important thing is to be prepared to invest over the long term to ride out any unexpected falls.

The need to compare the best ISA rates for over 60s

Not all Stocks and Investment ISAs are the same, nor are the wealth management specialists who offer and manage them. To find the best rates for over 60’s, you will need to check out the best do-it-yourself platforms and the best do-it-for-me platforms. Of course, if you are thinking about going down the DIY route, you’ll need to:

  • Carry out your own research regarding choosing the right shares
  • Construct your own investment portfolio
  • Track how it’s performing and be ready to move your money around

It’s only recommended for those who have the appropriate financial nuance.

When looking for the best ISA rates for over 60s, you can have as many ISAs as you like, including easy access Cash ISAs and Stocks and Share ISAs. Lots of over-60s do this so they can spread the risk. The more diverse your investments, the more likely you are to minimise any downturns.

How to get the best ISA rates for over 60s

Don’t limit yourself to one market. Many Brits go for the FTSE 100 because it is familiar, but there are other markets out there, like the USA’s S&P 500 and Japan’s Nikkei 225.

Similarly, an investment doesn’t restrict you to stocks and shares. You can also invest in:

  • Corporate and government bonds
  • ETFs (exchange-traded funds)
  • Investment trusts
  • Open-ended investment companies (OIECs)
  • Unit trusts

To get the best ISA rates for over 60s, you need to put together the best portfolio possible, which isn’t easy unless you have professional help or personal wealth knowledge.

Do fixed ISAs offer the best ISA rates for over 60s?

We often get asked the question, what are the best fixed ISA rates for over 60s? In the interest of clarity, let’s clarify that there is no such thing as a fixed-rate Stocks and Shares or Investment ISA. The only fixed-rate ISA is the Cash ISA. But even the best ISA rates for over 60s on Cash ISAs are not as good as Investment ISAs, but these Stocks and Shares ISAs expose you to more risk.

Cash ISAs with fixed rates vary according to the market’s volatility in which your assets are listed. They come with a variety of fixed terms, although strictly speaking, you can always access your money, but you may have to pay a fee.

The general opinion concerning the rate of time or term of Stocks and Shares ISAs is that you should be prepared to leave your money untouched long-term, by which the industry means a minimum of 5 years to offset any drops in the markets.

The pros and cons of Investment ISAs for the over 60s

Choosing a vehicle to get the Best ISA rates for over 60s can be quite confusing. Stocks and Shares ISAs bring the spectre of risk into the equation. But it would be best if you didn’t write them off without going over the pros and cons.

The Pros

  • The return with a Stocks and Shares ISA can be significantly higher than you would earn if you put your money into a cash or any other sort of ISA.
  • By using up your ISA allowance, which is currently set at £20,000 per annum, any interest earned by your stocks and shares is tax-free.
  • You can invest in various assets and in several stock markets.

The Cons

  • There is a risk of losing some of your investment if the products you invest in don’t perform well.
  • If an outside agency manages your fund, you will have to pay a fee, and depending on whom you work with, these fees can be significant.
  • If you choose to manage your investments yourself, you will have to pay trading fees.

The best regular savings accounts over 60s have access to?

Some people interested in finding the best ISA rates for over 60’s turn their attention to the best regular savings accounts for over 60s as they expect them to offer better interest rates. They do, but you have to tread carefully.

First of all, some regular standard savings accounts are flexible, and some are not. If you open one that isn’t flexible, they will expect you to contribute a certain amount every year. Typically, the sum is between £25 to £300 pa. If you don’t comply, you might lose interest, and your account could be closed. You may also find that there are restrictions on taking money out.

The other disadvantage with regular savings accounts is that you will have to pay tax on any interest according to your PSA and income tax bracket.

Another thing worth bearing in mind – especially for those over 60 – is that ISAs can be passed on via inheritance.

Choosing the right provider of the best ISA rates for over 60s

It would be best to choose an ISA provider based on what funds you want to invest in and what you want to achieve with your investments. Find a provider who offers the best ISA rates for over 60s and the most suitable features for you. The lowest-cost option might not be the best one for you.

Consider the number of funds available. How much does the platform charge? Transfer out fees? Account closure fee? Fund dealing charges? Which platform is easiest to use? A comparison site makes it easy to compare ISA rates and other options. Similarly, an investment consultant can help you choose the right platform for you with the best interest rates. They can help you pick the best investment for your needs.

Putting risk into proportion when analysing the best rate ISAs for over 60s

So, what are the best ISA savings accounts for over 60s?

When reviewing all of the different savings vehicles, there can be little doubt that the best ISA rates for over 60s are those you can earn by taking out a Stocks and Shares ISA. It all boils down to how risk-averse you are.

The best ISA rates you’ll earn on any ISA are in the form of compound interest. Over the long term, it can significantly increase the value of your investment, especially if you’re in your 60s and you started saving at an early age. Also, do not forget about risk and risk mitigation. ISA savings held in accounts from legitimate FCA-approved providers are protected by the Financial Services Compensation Scheme (FSCS).

This scheme offers individual protection of up to £85,000 on savings or £170,000 for a joint account on products from banks, building societies, and credit unions, including debt management, funeral plans, insurance, investments, mortgages, pensions, and PPI.

FAQ

Is there an ISA for over 60s?

Yes, there is an ISA for over 60s. The best ISAs for over 60s include cash ISAs, stocks and shares ISAs, and lifetime ISAs.

Where can I get 5% interest on my savings?

The best way to get 5% interest on your savings is to invest your savings in stocks and shares, mutual funds, ETFs, bonds, bond mutual funds, or real estate.

Where can I put my money to earn the most interest?

To earn the most interest, you can put your money in high-yield savings accounts, bonds, certificates of deposit (CDs), index funds, treasury bills, corporate and government bonds, ETFs (exchange-traded funds), investment trusts, open-ended investment companies (OIECs), and unit trusts.

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*Capital at risk. Tax treatment depends on your individual circumstances and may be subject to change in the future.