Good for higher earners who do not benefit from the PSA at all.Good if you need access to your money in the next 5 years.There are other good reasons to use a cash ISA depending on your personal circumstances: But any interest earned in a cash ISA is tax-free. Cash savers may find that the interest they earn pushes them over the Personal Savings Allowance resulting in them needing to pay tax. The Bank of England has raised interest rates from 0.1% in December 2021 to its current level of 1.75%, with further rises predicted.Ī higher interest rate environment usually results in higher interest being paid on cash savings. Introduction of the Personal Savings Allowance (PSA) in 2016, meaning most of us won’t pay any tax on our savings anyway (only about 5% of people currently do)Ĭash ISAs and stocks and shares ISAs both offer tax-efficient ways to save and invest your money, but the later can look more appealing in a high inflation, low interest rate environment.Better rates found on general savings accounts.There are a number of reasons for this, including: Related content: What is a cash ISA? Why have cash ISAs become less popular?Ĭash ISAs have waned in popularity over recent years with a record £7bn being pulled out of the accounts by frustrated savers in the last six months of 2021, according to AJ Bell. What do I need to consider when thinking about risk?.
What are the reasons for investing with a stocks and shares ISA?.Why have cash ISAs become less popular?.While a cash ISA may seem the safest option of the two, the rising cost of living will be eroding the value of your pot if the interest you are earning is eclipsed by the rate of inflation. Investing in a stocks and shares ISA means taking some risk with your money in the expectation that it will grow faster.
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