Do you know that there are alternatives to only having a New Cash ISA? Do you know the new savings limits and what they could mean for the way you think about New ISAs?
New Cash ISAs
From 1st July 2014, the New ISA rules were introduced. Savers were given the hope that the new £15,000 maximum investment into a New ISA would mean that they could put more cash into their New ISAs each month. Sadly, as Neil Lovatt states;
“…the Cash ISA market has not risen to the opportunity, instead choosing to offer low rates of interest on cash ISAs and in some cases actually reducing their rates for fear of overly high inflows.”
Neil Lovatt, Scottish Friendly’s Director of Financial Products
Many people prefer to save using cash as they feel more confident in their understanding of it. They know that they can put their cash into an ISA and have the cash returned to them as they wish. Due to the reasons Neil Lovatt describes above, these New Cash ISAs can be seen as giving savers a poor return on their cash investments.
Are there alternatives to having a purely Cash ISA?
One of the new rules for the New ISAs, that is overlooked by some due to a lack of understanding of the new alternatives to a purely Cash ISA, is that
the £15,000 investments into the New ISAs can be spilt in any proportion between the New Cash ISA and the New Stocks and Shares ISA. Some New ISAs can offer a balance of investments, including stocks and shares, cash, fixed interest and property funds (this is an example of a with-profits fund). The money you get back from these can vary, depending on how well these different investments have performed over the time the New ISA was open. Other rules can apply, depending on which company, bank or building society you take your ISA out with. The key point is that you do not have to only put your money into equity investment or only into cash accounts, you can split your money between them.
How should I invest my money using the New ISAs?
If you are considering using a New ISA or you are already using one, it is wise to think about how to split your money between the New Cash ISA and the New Stocks and Shares ISA, if you decide to split it at all. As new rules often mean that things change, it may be worth looking into whether you would get a better return on your investments by splitting it. It seems savers should be wary of putting all of their funds into an ISA that is cash only. As Neil Lovatt says;
“For every one investment ISA taken out, three cash ISAs are opened.”
Neil Lovatt, taken from Scottish Friendly’s Press Release: ‘New Cash ISA limits-A damp squib?’
This shows the tendency of savers to stay with what they know and trust, even though, because of the new rules, this might not be best for that saver. Being aware of all of your options when using the New ISAs is a must.
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Disclosure: This is a Sponsored Post. Please consult a financial adviser for advice on the different New ISA options.