Cash v Stocks and Shares ISA – which suits you?

piggy bank on top of the pound coins used for paying into ISA


Alistair Hardie

25th February 2014 at 3:03pm

As the start of the new tax year looms on the horizon, ISAs can provide savers with a great opportunity make the most of tax efficient saving.

So what are your options?

In a game of word association, if someone said ISA, I’d bet there’s a strong chance that you’d say “cash”.

But there is another response that you may not be so familiar with – stocks and shares.

What’s so different about a Stocks and Shares ISA when compared to a Cash ISA?  And should you consider both or just one to make the most of your tax efficient savings allowances?

Although you pay no income or capital gains tax on money in both, the similarities end there.   So how do they differ?

The risk of inflation on your savings

The Money Advice Service provide more information on Stocks and Shares and Cash ISAs here.

And what does an ISA mean to me?

When people say ISA to me, I say “both”. I have a Cash ISA which I use as my emergency savings fund.  But I also have a Stocks and Shares ISA which I am trying not to touch to give my money as much chance to grow as I can, especially at a time when interest rates are so low.  For me, having two ISAs gives me the best of both worlds for different savings goals.

*For illustrative purposes only. Source: FE, from 31 December 2003 to 31 December 2013, all dividends reinvested.

** For illustrative purposes we have assumed that the Cash ISA interest rate mirrored the Bank of England base rate over the savings period. Source: FE, from 31 December 2003 to 31 December 2013.

The information in this blog is not financial advice. A Stocks and Shares ISA is an investment. Its value can go up or down and may be worth less than you paid in.

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