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Ultimate 2020 ISA guide: Holly’s picks of stocks and shares ISAs

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It’s coming. The ISA deadline approaches on 5th April, marking the end of the 2019/20 tax year and sealing the lid on your current £20,000 tax-free savings allowance. (If this all sounds like jargon, don’t worry – by the end of this article you’ll know everything you need to.)

As it stands, cash interest rates are about as good for you as a soggy bacon butty. The best rates you can get for an easy-access cash ISA are around 1.3%. However, inflation is currently 1.5%. So for every £100 you save, you’d gain an extra £1.30 in interest but lose £1.50 of buying power to inflation. Basically, a cash ISA protects your money but also gradually shrinks it.

The alternative, then, is stocks and shares. Nothing is ever guaranteed, and patience is key, but the rewards can be well worth it if you have at least 5 years to invest.

So… who should you choose? I caught up with our CEO and resident ISA whisperer, Holly Mackay, to get her view based on the 30 test accounts she holds. She’s picked out the best ISAs for beginners and the best ISAs for sustainable investors, plus top picks for balancing fees and service on accounts worth up to £50,000 and over £100,000. But first…

 

(If you only need Holly’s top ISA picks, scroll halfway down this page to skip the refresher. This article’s a long’un!)

 

First let’s go over the basics…

What you DO need

  • Cash you won’t need to withdraw for at least 5 years
    The last thing you want is to become a ‘forced seller’ who has to sell their investments when the values are low – only use money you can afford to set and forget.

  • An idea of how much risk you’re willing to take
    Investments range from slow and sturdy ramblers to energetic and erratic mountaineers – the main difference being how quickly and sharply values rise and fall.

 

What you DON’T need

  • Any knowledge of the stock market
    You can take the wheel if you like, picking your own company shares and funds, or you can kip in the back seat with a ready-made portfolio that does everything for you.

  • A wheelbarrow full of cash
    You can start with less than £100 with some providers. In fact, 14% of stocks and shares ISAs in the UK have less than £1,000 saved into them, and 40% have less than £10,000.

  • Confidence in your ability to invest
    As long as you can afford to, just start small and you’ll pick it up as you go along. And don’t worry – only half the people who currently invest rate themselves 5 or more out of 10 for confidence.

 

What you can EXPECT

  • An average, well-mixed portfolio of shares tends to make around 5%–6% a year after fees. A lot more than a cash ISA. Of course, there is always a risk of losing money too.

  • You have to be prepared to ride out the highs and the lows – one year the stock market might soar, the next it might tumble. In 2008, the UK market fell by around 30%, then the next year it made most of it back. In 2017, the UK market rose by around 12%, then the next year fell by about the same again. Patience is vital.

  • Generally, the longer your timeframes, the greater the chance your shares will beat cash. Over any 10-year period since markets began, shares beat cash 9 times out of 10. Increase the timeframe, increase the odds.

 

Holly Mackay’s top stocks and shares ISAs 2020

Why should you give a crap what Holly thinks about ISAs? What makes her opinion worth listening to? Let’s recap!

Holly’s top picks are based on:

  • 30 test accounts with investment providers and robo advisers in the UK
  • Decades of first-hand experience comparing ISAs
  • Ratings and reviews from 2,500+ Boring Money readers – thanks!


Remember, this isn’t financial advice – we don’t know your personal circumstances and aren’t regulated to make suggestions tailored to you. These top picks are a general guide of what good looks like so you can make a more confident, better decision for yourself. All good? Then let’s begin…

 

Best ISAs for beginner investors

Wealthify

“A nice option which offers an easy way in for those who don’t want to make the investment decisions themselves. You can choose from one of 5 profiles and get a ready-made investment which is blended for you.”

Wealthify reviews and details



Moneybox

“Uses the concept of ‘round-ups’. You effectively save into an ISA by rounding-up change from purchases, chipping in 50p here and there into the ISA. It’s less dramatic than sending thousands of pounds to an investment provider in one hit and is a great way to dip a toe into the water. The app is really simple to use and surprisingly engaging for an investment service.”

Moneybox reviews and details

Nutmeg

“Another option which will walk investors through a simple questionnaire and then pull together a ready-made mix of investments to map to your preferences.”

Nutmeg reviews and details



 

Best ISAs for sustainable investors

Interactive Investor

“If you are looking for help to find sustainable investments, Interactive Investor has lots of research and information which is probably the best thought-through research out there for retail investors. We all have different priorities – avoiding fossil fuels, strong corporate governance, treating workers fairly, avoiding tobacco – and the tools here will help pinpoint what you are looking for.”

Interactive Investor reviews and details

 

Nutmeg

“Nutmeg also has a socially responsible option for all its portfolios and shares quite detailed information on what your investments will do for you and what they will do for the planet. One of the better options which actually tries to show and evidence what goes on under the bonnet.”

Nutmeg reviews and details

 

 

Best ISAs for saving up to £50,000

AJ Bell Youinvest

“A decently priced, good all-rounder which will let you buy both shares and a choice of leading investment funds in your ISA. There’s a nice app and the supporting research is good. For those less confident, help is at hand in the form of their ready-made options which do the heavy-lifting for you.”

AJ Bell Youinvest reviews and details

 

Fidelity

“A big-brand global name that offers UK investors a decently priced ISA, a good website, helpful people on the phones and a wide range of investments to suit all sorts of experience levels. The service has notably improved over the last year and is well worth a look.”

Fidelity reviews and details



Vanguard

“A huge US investment manager which offers low-cost investing to millions of customers around the world. You can set up an ISA here and choose from a range of 5 simple investment options from their ‘Life Strategy’ range. It’s low-cost but also currently rather ‘no frills’. They only offer their own products so if you prefer more choice and want to blend your own mix, they are not for you.”

Vanguard reviews and details

 

 

Best ISAs for saving over £100,000

Halifax Share Dealing

“Have a look if you know your way around investment markets and want a solid, basic option which is as cheap as they come. You can trade and access most mainstream investments. But buyer beware – this is bare bones stuff so don’t expect anything fancy.”

Halifax reviews and details



AJ Bell Youinvest

“Arguably the best halfway house between having reasonable fees for larger accounts but decent service and a good supporting website and app.”

AJ Bell reviews and details

 

 

Interactive Investor

“With a fixed £ fee for ISAs, this means they get relatively cheaper the more you invest. The website and service can be occasionally be patchy but this is improving. If you are time-poor and impatient the lower costs may not compensate for the sometimes clunky online journey.”

Interactive Investor reviews and details

 

You can open a new ISA each tax year. What else resets?

Remember, even if you opened an ISA last year (on or before the 5th April deadline) you can still open another one now with a new provider.

Each tax year comes with the option to:

  • Open one new stocks and shares ISA, and
  • Open one new cash ISA, and
  • Open one new lifetime ISA, and

  • Transfer one of your existing ISA balances into one of your new ISAs
    (e.g. you could transfer half the balance of an existing cash ISA into a new stocks and shares ISA with a new provider.) (Make sure you look into transfer fees from both providers first.)

 

But there are also restrictions:

  • You can only pay into one of each type of ISA in any given tax year
    (e.g. if you open and pay into a new stocks and shares ISA this year, you can’t pay into any another stocks and shares ISA until next tax year)

  • £20,000 is the maximum you can pay into your ISAs each tax year
    (e.g. you could add £10,000 to a stocks and shares ISA, plus £6,000 to a cash ISA, plus £4,000 to a lifetime ISA – or you could bung it all into one.)
    (£4,000 is the annual limit for a Lifetime ISA and does count towards your £20,000 tax-free total. But transfers of existing balances don’t count against your total.)

(Junior ISAs are a little different: you can only have one stocks and shares Junior ISA and one cash Junior ISA per child at any time, with an annual allowance of £4,368 split between the two. Read more here.)

 

Take one and pass it along…

Who else might benefit from reading this article?

Has your brother recently come into some money they don’t know what to do with? Is your niece starting to save for a house? Does your best mate stuff cash under a mattress?

Tax-free savings through an ISA is a benefit of living in the UK that’s available to everyone. To make sure someone you care about isn’t missing out, why not send them a link to the article you’ve just read – www.boringmoney.co.uk/bestISA2020 

 

Your final check – our cost calculator

Once you’ve decided who you like the look of, check their prices are competitive for how much you intend to invest. Simply pop a few details into our Investment Fees Calculator and get free, independent results in seconds.

 

*** notes on the costs we’ve mentioned alongside each provider ***

Best for beginners: Costs include both the ISA administration fee and all investment charges

Best for sustainable investors: Costs include the ISA and funds in the Ethical Growth portfolio on Interactive Investor; and the SRI portfolios on Nutmeg

Best for up to £50k: Costs include both the ISA administration fee and a low-cost own-brand passive investment option.

Best for over £100k: Costs assume the money is split between shares and funds, with 4 trades for each in the year. The Halifax and Interactive Investor fees would remain the same if we looked at a £200,000 ISA for example – they both have a fixed fee model. The investment fees depend on what you select.

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