Posted in:

ISAs: Time to move away from cash?

If you’re relying on a cash ISA for any part of your savings strategy, now could be time for a re-think. Whilst back in 2012 a cash ISA could have earned you over 3%, today you’ll be lucky to get much over 1%.

It’s especially important if you’re saving for something that’s likely to get more expensive. Recent Moneyfarm research highlighted that 40% of savers are focussed on saving for a holiday. However, holidays this year are likely to cost more – up to £75 per person for the average traveller, according to the Daily Mail. When low interest rates are combined with a drop in the value of the pound, savers are seeing that their money is not only earning less, it’s also worth less when they take it abroad.

Interest rates low

Looking at the rates available, it seems as if the cash ISA industry has given up on providing competitive interest rates. And with the personal savings allowance now in force, there’s no longer a need to set up a separate cash account. This is because your cash savings, for example in bank or building society accounts, can now earn money tax free – up to £1,000 in interest tax-free if you’re a basic rate taxpayer, and £500 if you pay tax at a higher rate.

So the savvy investor needs to be smarter with their money. Right now, leaving your savings in cash could cost the average UK saver £140 each year against inflation.

Sign up to receive the Moneyfarm newsletter

Get the latest news and tips for managing your finances, straight to your inbox.

By making an investment, your capital is at risk.

Stocks and shares ISA

One alternative is to look at a stocks and shares ISA. This way, your ISA allowance can work harder for you, offering higher returns and protecting the value of your money from inflation.

If you’re worried that this may make your savings less accessible, don’t be. Typically, a provider like Moneyfarm allows you to access your savings within a week, and we don’t charge any withdrawal free, giving you control of how long you stay in the markets. We also offer low management costs and transparency around your investment.

Provided you’re comfortable with the idea of investing, a stocks and shares ISA could be a viable alternative to cash savings and could be the best way to make your ISA allowance work for you – making that hard-earned holiday money go further.

Try Moneyfarm for free


Simple, efficient and tailored to your profile. The Moneyfarm investment plan maximises your long-term returns whilst protecting your wealth.

Sign up to MoneyFarm now: get access to your investor profile and discover the portfolio that is right for you, free of charge.

Get started