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Nov 2020

How Safe Is My ISA?

How Safe Is My ISA?

Whether you’re looking for an Investment, Cash, Innovative or Junior ISA, are a popular way to gain interest and returns without having to pay tax on what you make. But what are the risks of each type of ISA? We’ve gone through each ISA type and explained the risks, to make sure it’s clear for you. 

The risks associated with an ISA differ depending on the type of ISA account; it's helpful to make sure you know the risks of each type before you make a decision about which one you want to open. 

Is My Cash ISA Safe?

Cash ISAs are fairly low-risk; they are similar to savings accounts in this regard.

Your money will be kept in an account and gain the interest which was advertised by the account.

Your money will not be invested and therefore there is no risk of the market fluctuations affecting any money you keep in this account. 

Please be aware that inflation can eat in the real value of your cash over time.

Is my Investment ISA Protected?

The short answer: no....and yes.

Your investments will not be protected from fluctuations in the stock market.

That is the nature of risk with investing – you have the possibility of getting less money back than you put in due to market peaks and troughs. So, you could in theory lose money as a result of large market fluctuations - thus why the sharp market drop following the Coronavirus impact was quite to concerning for investors.

But, fluctuations are not uncommon in the market and the wisest thing you can do is to weather the storm - the dip will highly likely return to an upward trajectory and level out once again.

We've recently written a blog about what to do with your Stocks and Shares ISA in the face of the recent market disruption, so if you want to read more that's a great place to start.

There are protections in certain situations – for example, in the extremely unfortunate event that your fund manager goes bust then you are protected by certain schemes.

What you need to know is:

  • If you end up in a sticky situation with your fund manager, then your money is protected up to an extent.
  • Most ISAs, including Stocks and Shares ISAs are protected by the Financial Conduct Authority (FCA) which is an independent regulatory body. They regulate the conduct for most of the UK's financial bodies.
  • If your fund manager runs into issues and is unable to repay your money, then you could be compensated by the Financial Services Compensation Scheme (FSCS) for amounts up to £85,000 - per person, per institution. This is the UK's statutory compensation scheme.
  • This will protect the investments of the vast majority of people - but if you have a considerably large amount of investments (i.e. greater than £85,000) you should ensure your investments are spread across multiple different platforms to efficiently protect your money. 

What about my Junior ISA?

The level of risk associated with a Junior ISA depends on the type of JISA you’ve opted for – if you’ve got a Cash JISA, then you should refer to the earlier part of the blog on Cash ISAs.

If you’ve opted for an Investment JISA, then you should refer to the previous Investment ISA section of this blog; that will give you everything you need to know. One of the benefits of JISAs is that if you open them when your child is young, there will likely be more then enough time for the fluctuation of the market to run it’s course. 

What do I need to know about my Lifetime ISA? 

Similar to Junior ISAs, the risks associated depend on the type of Lifetime ISA you go with; if you decide to go with a Cash LISA, then there are very few associated risks. 

With an Investment LISA, then the associated risks are the same as with any investment in the stock market – you could get less out then you put in. 

It’s important to consider this, and also make sure that you try to hold your stock as long as possible (ideally five years) to allow for the fluctuations of the market to run their course. 

How about Peer to Peer ISAs?

Peer to Peer ISAs are a higher level of risk – they’re better suited to a more experienced investor. With higher risk, comes higher reward, as these account types usually boast larger returns and are a good way to diversify your portfolio of investments.

It’s unlikely that they will be protected by the FSCS scheme, so you could stand to lose any money you invest should that investment not perform well; and since it’s not protected, you have no coverage to get it back.

That’s why it’s very important to read the fine print – check what is and isn’t covered or offered by the provider and the ISA type you have selected. 

Read more about Cash ISAs.

Read more about Investment ISAs. 

Read more about JISAs

Read more about LISAs. 

Read more about Peer to Peer ISAs.

Investment Fund Supermarket ISAs

Stocks & Shares ISA

from Fidelity

ISA Option
Allows ISA Transfers
Regular Savings
  • Protection Scheme: FSCS
  • Fund Choice: Choose from over 4,000 investment options, including one of the widest fund ranges in the UK, plus shares, investment trusts and exchange-traded funds. There’s also expert guidance to help with your investment decisions, which includes a selection of tools and insights from Fidelity’s experts. Capital at risk. Tax and ISA rules apply.
  • Invest From: £25 through regular savings or £1,000 lump sum

Why we like it: Fidelity has lots of investment options, plus an extensive range of guidance tools to help you decide what to invest in. Their award-winning ISA is easy to start and offers great value, their a typical service fee of just 0.35%. Other ongoing charges apply. On top of that, everything is backed by Fidelity’s 50 years of investment experience.

Important: The value of investments can go down as well as up so you may get back less than you invest. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Tax treatment depends on individual circumstances and all tax rules may change in the future.

Stocks & Shares ISA

from Interactive Investor

ISA Option
Allows ISA Transfers
Regular Savings
  • Protection Scheme: FSCS
  • Fund Choice: Access 40,000+ UK, US and international shares on 17 global exchanges. Choose from over 3,000 funds or select a ready made portfolio. Investment trusts, ETFs, Bonds & Gilts. Option to invest in 6 low cost funds selected by experts to get you started. Capital at risk. Tax & ISA rules apply
  • Invest From: £25 a month or any lump sum

Why we like it: An award-winning ISA that gives you complete control. The second largest platform in the UK with the widest choice of investment options in the market including funds, investment trusts, ETF’s and more. Strong ethical investment proposition with more than 140 investment options. Open online in less than 10 minutes. Access to expert independent ideas and analysis. Low cost fees and trading.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Junior ISAs

Junior Stocks and Shares ISA

from Hargreaves Lansdown

Regular Savings
  • Investment Options: Invest from £25 per month or deposits of £100.

Why we like it: Invest for your child from £25 pm tax free. A wide range of top performing funds to choose from. The annual charge for holding investments in a Hargreaves Lansdown Junior ISA is never more than 0.45%. Your dealing and other charges will depend on the investments you choose.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Important Risk Information:

The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website aims to provide information to help you make your own informed decisions. It does not provide personal advice based on your circumstances. If you are unsure of how suitable an investment is for you, please seek personal advice.

High Income ISAs

High income ISA ideas:

ISAs Products

Cash ISAs

Fixed Rate & Instant Access ISAs:

Cash ISAs: 

Stocks & Shares ISAs

Types of Stocks and Shares ISA include: 

Stocks and Shares ISAs

Latest News

5 Considerations for Your Next Investment ISA

15th March 2021

You've decided to invest your savings into a Stocks and Shares ISA. You'll be using your tax-free ISA allowance for this year before the deadline, while also investing your money for your future. But what do you need to consider before opening an account? We've put together a list of our top five considerations for you to think about before you click "apply". 

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