Cash ISA rates continue to fall

Posted on February 6, 2017

The Bank of England voted to keep its base rate at an historic low of 0.25% on 02 February 2017, despite expectations of rising inflation and slower wage growth squeezing household budgets and spending this year.

The Bank is forecasting an acceleration in economic growth but has predicted that inflation, currently at 1.6%, could move in either direction to ensure a sustainable return of inflation to the 2% target.

So what does this mean for investors?

Savers will continue to suffer with inflation threat and progressively falling interest rates on cash ISAs for the foreseeable future with no end in sight. You may be left scouring the market for another cash ISA but with average rates at 0.46% at the end of 2016, you may want to consider an Investment (stocks and shares) ISA.

Average Cash ISA Rates

Average Cash ISA Rates

Source: Bank of England, January 2011 – August 2016

Why consider an Investment ISA?

With current cash ISA rates extremely underwhelming, you could boost your returns over the medium / long term without exposing your money directly to the stock market. We’d class this as a low to medium risk investment so it could suit you if you have a cautious approach to investing.

Sheffield Mutual’s ISA has produced consistent returns over the last 5 years through its with-profits fund*. The fund uses a process known as ‘smoothing’ to iron out the ups and downs normally associated with investing so it doesn’t carry the same volatility risk as a unit-linked fund that would track the stock market’s performance.

You can transfer your cash ISA to an Investment ISA without effecting your current tax year allowance and you will retain all your ISA tax benefits. You should, however, consider holding sufficient cash elsewhere with instant access to cover any emergencies and be mindful that stock market investments can go up as well as down and you could, in some circumstances, get back less than you paid in.

Click here for a guide to Sheffield Mutual’s with-profits fund and historic bonus rates.

THIS BLOG PROVIDES GENERIC INFORMATION AND OPINIONS OF THE WRITER AND SHOULD NOT BE RELIED UPON FOR MAKING INVESTMENT DECISIONS. NO ADVICE HAS BEEN PROVIDED BY SHEFFIELD MUTUAL. IF YOU ARE IN ANY DOUBT AS TO WHETHER A SAVINGS OR INVESTMENT PLAN IS SUITABLE FOR YOU, YOU SHOULD CONSIDER CONTACTING A FINANCIAL ADVISER FOR ADVICE. IF YOU DO NOT HAVE A FINANCIAL ADVISER, YOU CAN GET DETAILS OF LOCAL FINANCIAL ADVISERS BY VISITING WWW.UNBIASED.CO.UK. or WWW.VOUCHEDFOR.CO.UK ADVISERS MAY CHARGE FOR PROVIDING SUCH ADVICE AND SHOULD CONFIRM ANY COSTS BEFOREHAND. ANY REFERENCE TO TAXATION IS BASED ON THE WRITER’S UNDERSTANDING OF CURRENT TAX LEGISLATION AND PRACTICE, WHICH COULD CHANGE IN THE FUTURE.

* Past performance is not a reliable indicator of future performance.

Posted In


Need Help? Ask a question Need Help? Ask a question

Send to a friend