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Choosing the best ISA

If you’re looking for a simple, tax-efficient way to grow your money on the financial markets, a stocks and shares ISA is probably for you. Yet, with a number of different options available, how can you know which is the best ISA for you? Here are five things to look out for when deciding which ISA is for you.

It might seem like the ISA landscape is complex due to the number of options available, but the good news is that it’s really quite simple. The best ISAs are essentially just savings or investment accounts that allow you to grow your money tax-free.

Ordinarily, you’d be required to pay tax on any profit you make above your annual capital gains tax allowance when you sell your investments, and on any income you earn above the dividend allowance. If you put it in an ISA, you don’t have to pay a thing.

What types of ISAs are there?

The different types of ISAs available include the cash ISA, stocks and shares ISA, Lifetime ISA, and Innovative Finance ISA. Each play their part in reliable financial planning.

You can invest up to £20,000 each year into your stocks and shares ISA, although you can spread your allowance between different types if you wish.

If you’re fed up with the returns available on savings accounts due to the low interest rate environment, you might want to protect and grow your money on the financial markets. You should have paid off any expensive debt, have three months of outgoings saved up in case of an emergency, and have a longer time-horizon before you start investing, but once you do you can plan for the future with confidence. Investing for your retirement, for example, is an excellent choice.

Due to the fundamental dynamics of the financial markets, you need to be able to take on some risk if you want to grow your money for the future. If you’re looking to grow your money for something in the next two years, you’ll want to protect the value of your money so you can reach your goals. Your portfolio will naturally be more risk-averse, which limits the scope for return.

Time can be your best friend when investing – many people hunt for that elusive edge that will help them reach their goals, the ‘holy grail’, but all you really need is time. Time allows you to take on those riskier investments in the hope for bigger returns and means you can ride out any short-term fluctuations.

Here are the five things you should look for to find the best ISA for you.

1. Investment advice

Stocks and shares ISAs are often DIY vehicles, which means you’ll have to manage your investments yourself. You have the flexibility to choose what goes into your portfolio, but you have the responsibility of planning your investment strategy, outlining your asset allocation, and researching the investments that best reflect you to go into your portfolio.

Many people like this freedom, but for those who are too busy to manage their investments by themselves, or lack the financial confidence to be in charge of the family finances, investment advice can help people make better decisions with their money.

Making the right decisions for your financial situation means you’re more likely to reach your financial goals, whatever they may be, and lead a better quality of life.

Innovation in the financial services sector means that people can now access investment advice at the touch of a button and at a fraction of the price offered by the traditional industry leaders. It can also be delivered anywhere and at any time, whether on your daily commute, over a glass of wine once the kids are in bed, or over brunch at the weekend.

Investment advice helps people invest in a way that’s right for them. Understanding your financial background, appetite for risk and nature of your financial goals means you can build your investment portfolio in the best way to achieve these.

At Moneyfarm, our technology allows us to provide expert digital investment advice for a fraction of the cost, with ongoing suitability tests that ensure your investments continue to put you in the best position to reach your goals for as long as you invest with us.

2. ISA portfolios fully managed by specialists

Once you know what your stocks and shares ISA portfolio should look like in terms of asset allocation, how do you decide which investments to put in it?

Once you’ve got your portfolio set up, do you have the time and discipline to manage your portfolio to ensure you’re on the right track? You can invest up to £20,000 in your ISA each year, so you’ll want to know you’re investing in the best place to reach your goals.

Many people love the thrill and responsibility of managing their investments themselves, but others just don’t have the time, skill or knowledge to do their financial future justice. That’s why many prefer the experts to do it for them, so they can focus on the important things in life, knowing that a team of professionals with a track record of performance have their investments under control.

At Moneyfarm, our investment strategy is built around our strategic asset allocation team, which takes a 10-year view on market trends. While we can broadly forecast where we’re going to be in a decade, we know the route there might not be smooth, so we complement our strategic strategy with a tactical overlay to take advantage of any new opportunities that arise along the way.

3. Don’t let fees eat into your returns

Traditionally, having an expert manage your money for you has come at a significant cost. The more you pay in fees, the more your investments have to grow for you to break even, and the further they need to grow to make a profit.


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It doesn’t help that pricing structures have also traditionally been convoluted, with many investors unaware of how much they’re actually paying in fees. All investors should be able to access cost-effective investment advice and discretionary fund management to help them reach their financial goals.

Thanks to changes in the regulatory landscape, wealth managers now have to adopt Moneyfarm’s philosophy of transparency and simplicity, although look out for exit fees as these still aren’t clear on many platforms. When you invest with Moneyfarm, you’re charged one flat fee across all of your investments with us, a percentage that goes down the more you invest or the more your savings grow. 

4. Free transfers

Whether you’ve built up a small fortune in a cash ISA or have a number of different stocks and shares ISAs cumulated up over the years, many investors like to transfer their ISA into one place to benefit from cheaper fees and to manage their investments more easily.

When you want to move your money from one ISA provider – whether it be a bank, an asset manager or an investment platform – to another, it’s important you transfer your money correctly. You don’t want to take your money out of your ISA wrapper because you will lose the tax-free benefits you’ve accrued over the years.

ISA transfers have become simple and hassle-free for investors looking to make their money work harder for them, but it’s important you understand whether you’ll be charged anything to move providers as this could impact your decision.

Costs like transfer fees, whether hidden or not, can eat into an investor’s return. At Moneyfarm, we believe investors should be able to transfer in and out for free – and you can. One of our founding philosophies was to be transparent over costs, too, which is why we don’t have any hidden charges.

5. Regular investing

When you’ve got a lump-sum to invest, you’ll want to get it working harder for you as soon as possible, but it’s important you supplement this with a regular investment to your ISA.

In addition to increasing the amount you have invested in your ISA, it also averages out the amount you spend for an investment over time, potentially lowering it during times of volatility. Little and often is a mantra that’s as effective as it is straightforward when it comes to investing. 

That means you could end up paying less for an asset, which makes it that much easier to turn a profit.

Regular investment plans are a great way to benefit from pound cost averaging, but make sure you know how much setting up and running a regular investment plan will cost you. At Moneyfarm, it doesn’t cost a thing to deposit money in your account or set-up a standing order.

This means you keep more of your money invested in the market, which can help you benefit from compound interest – where your earnings are reinvested to earn their own return. Albert Einstein called this the eighth wonder of the world, and it can make a real difference over the long run.

Which ISA to choose?

At Moneyfarm, we’ve built our investment strategy around the stocks and shares ISA. Of all the options like cash ISA, lifetime ISA and junior ISA, it’s the stocks and shares ISA that we feel is the best ISA for the majority of people.

We recently performed a 10-year study comparing the performance of a hypothetical stocks and shares ISA vs that of a cash ISA. Against the backdrop of a low interest environment, it’s clear to us that a well diversified, actively managed stocks and shares ISA is the best choice for our customers to beat inflation and protect and grow their wealth for the long term.

You don’t need to be an expert to invest in stocks and shares and you certainly don’t need hundreds of thousands of pounds to do it. Digital technology has democratised the industry to such a degree that almost anyone should be considering supplementing their futures with a well-thought-out investment plan. So, you’ll want to choose an ISA provider and a wealth manager that utilises technology to make the process as frictionless and transparent as possible.

For the full breakdown of what an ISA is,  and how to invest in one, here is our comprehensive guide. Furthermore, if you want to understand how a S&S ISA work, here you can find more information.

How to switch ISA provider

As we have discussed, people switch the ISA provider for a number of reasons. Whether it’s because their current provider isn’t giving them the returns they need, or they just want to have all their investments in one, easy to manage place – switching is more common than you might think.

If you’re unsure whether it’s time to move your ISA, here’s a simple checklist.

  • Is the return on your ISA lower than inflation? The purchasing power of your savings could be shrinking over time. You might want to think about a stocks and shares ISA
  • Not finding the time to manage your money? Or you could be missing out on the important things in life because it’s taking you hours to manage your savings or investments. A provider like Moneyfarm that does it all for you.
  • Are fees eating into your returns? Your ISA could be costing you a small fortune or you’re not even sure what you’re paying. Fees should be simple and low-cost.

You can transfer any type of ISA to Moneyfarm, whether it’s a cash ISA or a stocks and shares ISA. If you’re transferring an ISA in the same tax year, you’ll have to move the whole thing, with older ISAs you can choose how much you want to transfer.

It can take up to 30 days to transfer your stocks and shares ISA from your existing provider to Moneyfarm. We won’t charge you a thing to transfer in or away from Moneyfarm, but your existing provider might.

To initiate a transfer, all you have to do is get in touch with a member of our investment advisory team. They’ll be happy to guide you through the entire process from start to finish, and they’ll take care of the admin for you. Get peace of mind that your ISA is in the right hands when you switch to Moneyfarm. 

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As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest.