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, via a DIY platform, but experience is recommended |
| How to find the best ISA provider? | Look beyond just the headline rate. 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 be passed on to a spouse/partner via an Additional Permitted Subscription (APS) |
What is an ISA and is there one specifically for over 60s?
The Individual Savings Account (ISA) was introduced in 199 by the then Chancellor of the Exchequer, Gordon Brown to offer tax-free interest payments and capital gains. While there is no specific product labelled exclusively as an “ISA for over 60s,” the Stocks and Shares ISA and Cash ISA are the most relevant options for people over 60.
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The Five Types of ISAs
When ISAs were launched, the ISA allowance was £7,000 per annum. Over the years, the allowance has increased, and the current ISA allowance for the 2025/206 tax year is £20,000. You can split this allowance across the following types:
There are five different types of ISA.
- Cash ISA
- Innovative Finance ISA
- Junior ISA
- Lifetime ISA
- Stocks and Shares ISA, or Investment ISA
While Lifetime ISAs are excellent for younger savers buying homes, the best ISA rates for over 60s are typically found within Investment ISAs or competitive Cash ISAs.
Cash ISAs for Over 60s: Security vs. Inflation
Cash ISAs allow UK residents (aged 18+) to save tax-free. They are popular among retirees who prioritise capital security over high growth.
The Impact of the Personal Savings Allowance (PSA)
Since the introduction of the PSA in 2016, basic rate taxpayers can earn £1,000 in interest tax-free outside of an ISA (£500 for higher rate taxpayers). However, for over 60s with substantial savings, the interest earned often exceeds these limits, making the tax-free wrapper of a Cash ISA vital.
Are Cash ISAs the best option?
While safe, Cash ISAs can struggle to beat inflation. Even the best fixed-rate Cash ISAs (currently offering between 3.70% and 4.20%) may lag behind the potential returns of investments over a 5-10 year period.
Note on Fixed Rates: If you choose a fixed-term Cash ISA (e.g., 1, 2, or 5 years), be aware that withdrawing funds early usually incurs a penalty ranging from 90 to 365 days’ loss of interest.
The Lifetime ISA (LISA): Is it relevant for Over 60s?
The LISA is designed for those aged 18 to 39. If you are over 60, you cannot open a new Lifetime ISA. If you already hold one, you can continue to save until age 50. Generally, for those seeking the best ISA rates for over 60s, the LISA is not a viable route unless you are already in the scheme.
Stocks and Shares ISAs: Potentially Higher Returns
For those over 60 looking to grow their capital or generate an income stream that outpaces inflation, Stocks and Shares ISAs generally offer the highest potential rates of return, albeit with investment risk.
Why consider an Investment ISA in your 60s?
Historical data supports the case for investing over cash for long-term growth. For example, the S&P 500 has recorded an average return of over 10% historically over long periods. While past performance does not guarantee future results, a diversified portfolio is often the best defence against the erosion of purchasing power in retirement.
Balancing Risk and Reward
Investments can go down as well as up. However, risk can be mitigated through:
- Diversification: Spreading funds across geographies (UK, US, Japan) and asset classes (Bonds, Equities, ETFs).
- Time in the market: Staying invested for a minimum of 5 years.
- Professional Management: Using wealth management platforms to construct portfolios tailored to your risk appetite.
Fixed Rate ISAs vs. Investment ISAs
We often receive queries about “Fixed Rate Investment ISAs.” To clarify:
- Fixed Rate Cash ISAs: Offer a guaranteed interest rate (e.g., 3.85% for 5 years) but lock your money away.
- Investment ISAs: Do not have “fixed” rates; returns depend on market performance.
For over 60s, a hybrid approach is often best: keeping an emergency fund in an Easy Access Cash ISA (rates approx. 3.7% – 4.0%) and investing the remainder for long-term growth.
Inheritance and ISAs for Over 60s
A crucial consideration for this age group is estate planning.
- Inheritance Tax (IHT): ISAs are part of your estate for IHT purposes.
- Additional Permitted Subscription (APS): If an ISA holder passes away, their spouse or civil partner can inherit an additional ISA allowance equal to the value of the deceased’s ISA. This ensures the tax-free status of the savings is preserved.
How to Choose the Best Provider
Finding the provider with the best ISA rates for over 60s involves more than just looking at a percentage figure. You should consider:
- Do-it-yourself (DIY) vs. Managed: Do you have the time and skill to pick stocks, or do you prefer an expert to manage the asset allocation?
- Fees: High management fees can eat into your retirement income. Compare platform charges and fund dealing costs.
- Flexibility: Can you withdraw money easily if you need it for healthcare or family emergencies? Flexible ISAs allow you to replace withdrawn cash within the same tax year without affecting your allowance.
Conclusion: What is the best ISA for over 60s?
If you are risk-averse or need the money within 1-3 years, the best Cash ISAs are your safest bet. However, if you are looking to preserve the real value of your wealth over a 10+ year retirement, a Stocks and Shares ISA historically offers superior returns.
Many over 60s choose to split their £20,000 allowance: allocating a portion to cash for security and a portion to investments for growth. Always ensure your provider is FCA-regulated to benefit from FSCS protection (up to £120,000 per person).
FAQ
Is there a specific ISA for over 60s?
No, but over 60s typically benefit most from Flexible Cash ISAs (for access) and Stocks and Shares ISAs (for income/growth).
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.
*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.
