With interest rates at rock bottom and inflation spiking to 1.6%, your cash ISA could be losing value rather than making money for you. The good news is that you’re not stuck. Switching to a stocks and shares ISA is easy and could be a worthwhile alternative.
Here’s how to start getting better returns from your valuable ISA allowance.
First, check your rate
Find out what return you’re getting. Sometimes, banks entice you to buy an ISA with an attractive rate, only to drop it after a few years. A Which? analysis revealed a “staggering” number of cuts in recent years. Their report cites one ISA provider that cut its rate from 2% to 0.25% over six years. If this has happened to you, it’s definitely time to consider a switch.
And if you have a cash ISA, chances are your returns are minimal at the moment. In fact, you’re probably losing money. With inflation at 1.8% and the best cash ISA only returning 1.05%, the purchasing power of your savings could be declining. The Which? report identified one cash ISA offering a rate of just 0.05%.
Then remember: don’t withdraw, transfer instead
When you take money out of an ISA, you lose the allowance and the tax benefits. However, you can easily transfer your existing ISA to a new one with a better return. According to the government this should take no longer than 30 days. It’s a simple process and it keeps your tax benefit intact.
For example, you can move your ISA to Moneyfarm in three easy steps:
- Sign up to Moneyfarm on our website or mobile app.
- Build your investor profile using our specialised questionnaire
- Choose your ISA account and complete the transfer form.
With inflation looking set to creep up, now’s the time to make sure that your ISA investment is generating returns as well as saving on tax.