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!)
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:
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…
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”
“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.”
“Arguably the best halfway house between having reasonable fees for larger accounts but decent service and a good supporting website and app.”
“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.”
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:
But there are also restrictions:
(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.)
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
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.
Join the thousands of people who get our weekly musings on money, great products, top tips and a dollop of opinion.Sign up to Holly's Blog
How are other people investing sustainably? Learn from their experiences.
Read investor stories, discover funds recommended by experts, unpack your investor toolkit and more.