Cash ISAs are more popular than stocks and shares ISAs, according to research from HSBC. A survey of 2,000 UK adults found that 21% will save more in a cash ISA, while 7% of savers say they will save more in a stocks and shares ISA.

Learn more about Saga's stocks and shares ISAs

Savers can now invest the full amount in either stocks and shares or cash, rather than splitting it between the two as the rules previously allowed. 

They also have the option of transferring some or all of their existing stock and shares ISA into cash, should they want to exit the stock market. 

Previously they were only able to transfer from a cash ISA into a stocks and shares – and not the other way. 


ISAs are now more flexible

This change was long overdue and makes ISAs more flexible and suitable for anyone looking to save or invest. 

While investing in the stock market promises the chance of higher returns, many prefer to keep their money in cash.

With the allowance currently at £15,240, many will be considering the best home for their money.

Putting money into cash ISAs

Those who want access to their money and don’t want to put their faith in the stock market will remain loyal to the cash ISA.

The average cash ISA interest rate is now 1.04%, according to Moneyfacts.co.uk; five years ago it was 1.51%.

But that’s not to say you shouldn’t use your allowance. If you don’t use it each tax year, you lose it forever. 

While this may not seem to be a great loss right now, it would mean a reduced lump sum available to earn tax-free interest in the future.

Accounts come in all shapes and sizes, so you need to do your homework on which type works for you. There are easy access accounts which say what they do on the tin. 

Fixed rate accounts are ideal if you don’t need access to the cash for a year or more. 

Banks and building societies pay better rates if you agree to leave your money where it is for at least a year. 

With the new limits now available, savers can pay into their easy access accounts as normal in most cases, but those with existing fixed rate accounts should check with their bank on the window available to top up.

Those with investment ISAs can also now switch to cash.

Investment specialist Rebecca O’Keeffe said: “One option is to make use of the cash park facility available through most investment ISAs. 

“Investors can then drip-feed money into the markets, reducing the chance of capital falling in value all at once.”

Investment ISAs

Financial advice professional Chris Williams said: “Savers need to have a clear strategy. While keeping your money in cash is good for when you need to access funds for an emergency or if you're saving for something in the not too distant future, parking your money in cash for the longer term leaves it exposed to the risk of inflation, which can reduce its 'real' value.

“Of course, there is no risk-free approach to investing. However, they can spread the risk by diversifying their investment across a range of asset types such as shares, bonds, cash and commercial property.”

Adrian Lowcock, independent investment adviser, said: “Drip feeding your money into today’s markets would be the most sensible approach.”

In doing so, you buy fewer shares when prices are high and more when prices are low. 

Learn more about Saga's stocks and shares ISAs.

Holly Thomas / 03 July 2014 (Updated 28 June 2016)
The opinions expressed are those of the author and are not held by Saga unless specifically stated. The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.

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