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Savings & Investments

What Are The Best ISA Rates?

Written by Katie Clarke on Sep 21st, 2021 Time to read: 4 minutes


You can understand why ‘Best ISA Rates’ is one of the most searched for subjects online – people want to get as much return as possible on their money when saving and investing and get the best ISA rates available. An ISA can be a good place to grow your money free of tax, but you have to decide on the most effective ISA, for you – a Cash ISA or Stocks & Shares ISA? A Cash ISA will have an interest rate, whereas growth in a Stocks & Share ISA will depend on how you are invested.

For Cash ISAs, the best ISA rate really depends on what providers are offering. It is worth shopping around, but Easy Access Cash ISA rates are notoriously low, with many currently giving you an interest rate that is below inflation at a rate of between 0.4% and  0.75%. This means your money could lose buying power in a Cash ISA.

You may get a little more interest on your money in a fixed rate Cash ISA, this means the interest rate is fixed in exchange for less flexibility on withdrawing your money. For example, a fixed rate of 1.5% for five years, but with penalties for withdrawing before the end of the five year term.

The thing to note here is that a 1.5% return is still below inflation, so even though it may seem reasonable on paper, your money is actually going to buy less five years later.

So to recap, a Cash ISA is useful in that it allows you to invest up to £20,000 a year, and you never pay tax on it, but the reality is when you are shopping for best ISA rate, you’ll struggle to find an easy access or fixed rate Cash ISA that could beat inflation in the coming years.

That’s where the Stocks & Shares ISA comes in.

Stocks & Shares ISAs are linked to the performance of the shares and funds they are invested in, not an interest rate. This means that your ISA has the opportunity to outperform inflation. Of course, capital is at risk, and investments in stocks and shares can go down as well as up, so a Stocks & Shares ISA is best invested for at least five years to ride out any volatility.

Keep in mind that you can use both Cash and Stocks & Shares ISAs. Your ISA allowance for the current tax year is £20,000 and you can invest this in a Cash ISA, a Stocks & Shares ISA or a combination of the two, and any growth is tax-free. Ensuring you do your research into the best ISA rates is a good place to start.

It all comes down to your goals, what is it you are investing or saving for? If you know you want to buy something in the next year, a Cash ISA could make sense, and you could find the best ISA rates with a quick search on a comparison site online. For a longer term goal, and potential growth to beat inflation, you might be better with a Stocks & Shares ISA.

You can use a Stocks & Shares ISA to invest in a fund that is low cost, globally diversified, and well managed to give you growth over the long term. Investing in the True Potential Portfolios, which are set up from defensive to aggressive to match your attitude to risk, could be a good idea. You can explore your goals on the True Potential app or speak to a financial adviser to learn more.

So if you’re taking away just a few points, remember that when looking for the best ISA rates on a Cash ISA, that the rates are historically low, and your money will lose buying power if your interest rate is below the inflation rate.

If your goal is short term, a Cash ISA could be useful, and you’ll easily find the best ISA rates available to you from a variety of providers with an online search. However, many investment goals are longer term, so to have a chance of growing your money, consider diversified Portfolios in a Stocks & Shares ISA.

True Potential Wealth Management offers restricted financial advice. Our service is specifically designed for clients wishing to access their financial affairs online. With investing your capital is at risk. Investments can fluctuate in value and you could get back less than you invest. Tax rules can change at any time. Please be aware that this communication should not be considered as financial advice.

True Potential Wealth Management LLP is authorised and regulated by the Financial Conduct Authority.  FNR Number 529810.  Registered Head Office: Newburn House, Gateway West, Newburn Riverside, Newcastle upon Tyne, NE15 8NX. True Potential Wealth Management is a Limited Liability Partnership. OC356611.


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