Independent financial adviser, Becky Hammonds of Willow Financial Services, looks at the true story behind low rates on Cash ISAs and why it is worthwhile keeping calm during the Coronavirus situation and looking for better paying long term investments:
Britain’s biggest banks will pay savers as little as 38 pence interest on each £1,000 in their cash ISAs this year and next year looks set to be worse with some accounts expected to pay just 10 pence.
The appeal of cash ISAs is that your interest is automatically tax-free. But low rates have meant savers are now ditching the once-popular accounts in their droves.
The personal allowance introduced in 2016 allows basic rate taxpayers to earn £1,000 of interest from ordinary savings accounts each year without paying tax.
However, with savings rates so poor, the majority of savers won’t have to pay any tax on their interest anyway.
There are stocks and shares ISAs available that offer a better return and even for cautious investors, there are opportunities worthy of consideration. It is understandable to be cautious given the impact of Covid-19 on the economy.
But, it is worthwhile considering that stock market performance in years of apparent crisis proves that sensible long-term investors should always benefit and let’s face it the current coronavirus situation is more of a time of crisis than most of us have ever experienced.
Prudent investing depends partly on buying quality equity investments and holding on to them – “time in the market, not timing the market”.
Investors can probably think of dozens of reasons not to be in the stock market, as they may have done during the Falklands War and the 2003 invasion of Iraq, but that patience will reap rewards.
It’s easy to think of a reason not to invest but consider this: A buy-and-hold strategy that emphasises diversification offers an opportunity to build wealth over time, despite short-term market fluctuations.
It was true several decades ago, and it’s still true today. That’s why we think the stock market is a good place for long-term investors.
The spread of investments and the quality of the product portfolio offers the best protection to investors and the regular reviewing of this keeps it in the most appropriate arena.
A good adviser will keep clients abreast of all the market changes and will frequently revisit the portfolio making suggestions at each review.
For more information contact Becky Hammonds on: 01782 331158 or 07969 269677 or email firstname.lastname@example.org.