Cash ISA or Stocks and Shares ISA?

If you’ve decided it’s time to invest your hard-earned savings and make your money work for you, then you may be interested in an Individual Savings Account (ISA). Each ISA has a different purpose – for example, a Lifetime ISA or Help to Buy ISA can be put towards buying your first house. Other accounts are available simply to help you save, either for the future or to see returns on a short-term investment. For this purpose, you may be interested in a Cash ISA or a Stocks and Shares ISA.

What is a Cash ISA?

A Cash ISA allows you to put money away that is not subject to income or capital gains tax. With a Cash ISA, you can save up to your maximum ISA allowance. This interest does not contribute to your Personal Savings Allowance. 

Why would you choose a Cash ISA?

Opening a Cash ISA gives you the opportunity to grow your savings each year, totally tax-free, based on the interest on your account, of course. A Cash ISA is also totally risk-free. Your savings are not subject to fluctuations in the market like a Stocks and Shares ISA. 

A Cash ISA is a great way of making your money grow and is covered up to £85,000 by the Financial Services Compensation Scheme (FSCS).

What is a Stocks and Shares ISA?

When you invest your cash into a Stocks and Shares ISA, the money is taken and re-invested into asset-backed investments. Be aware that with a Stocks and Shares ISA the value of investments, and any income you receive from them, can fall as well as rise so you could get back less than you invest.

Why would you choose a Stocks and Shares ISA?

A Stocks and Shares ISA could be the preferred choice for anybody looking to invest longer term or who is looking to invest in a different type of investment. However, while a Stocks and Shares ISA offers the potential for a greater return on investment, these ISAs are not without risk. Their return is based on which funds are invested into and the level of risk that you choose. You may see the value of your investment go down as well as up as Stocks and Shares ISAs are subject to fluctuations in market conditions. There may be changes that affect your investment which are totally out of your control and you may get back less than you invest. 

Cash ISA vs Stocks and Shares ISA

If you’re not sure where to start with investments, ask yourself what your saving goals are. It’s worth noting that you can split your annual ISA allowance limit between a Cash ISA and Stocks and Shares ISA, helping you reap the benefits of both. Your capital will be at risk with a Stocks and Shares ISA and you may get back less than you invested. 

Stocks and Shares ISAs could be ideal for those who want to put their money away for a long time and are prepared to take more risk with their investments. Cash ISAs are also suitable to put money away for a long period of time but with a more definitive return. Speak to an independent financial adviser if you would like professional advice on this subject - qualifying members of The Nottingham have access to Wren Sterling

Switching your savings over to a cash ISA with The Nottingham is easy. We can help you transfer your savings from a Stocks and Shares ISA into a Cash ISA if this is an option that you are interested in and meets your investment objectives. You can also switch another provider's cash ISA to The Nottingham. To help you decide which is the most suitable ISA for you, please see our table below to guide your thinking.


  Cash ISA  Stocks & Shares ISA
Which ISA is most suitable for short-term saving goals? Y N
Which ISA is most suitable for longer-term saving? Y Y
Does this ISA have substantial risk? Could I get back less than I invest? N Y
How much is protected by the FSCS? £85,000 £50,000

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