With interest rates softening and inflation eating into savings, many savers are asking whether a Stocks and Shares ISA could deliver better long-term returns.
The wrapper still shields growth and income from Income Tax (IT) and Capital Gains Tax (CGT), and you can put up to £20,000 into ISAs each tax year.
The key to making the most of an ISA is how and when you invest.
What are Stocks and Shares ISAs?
It is a tax wrapper that lets you hold:
- Cash
- Funds
- Investment trusts
- ETFs
- Shares
- Bonds
- Gilts
All of these will be free from UK IT and CGT. That makes compounding cleaner as you keep what your investments earn without further UK tax bills.
Over long periods, equities have tended to beat cash, sometimes by a wide margin.
Recent industry data shows a material gap between average stocks-and-shares ISA returns and low-risk cash ISAs over a decade.
That gap is why savers tempted to sit in cash may be losing out over time.
How to unlock better returns
Start with a clear plan that defines your timeframe and risk tolerance and protect yourself with an emergency cash buffer so you can stay invested through market swings.
Alongside this, it is wise to focus on diversification.
Broad global equity and bond funds or low-cost ETFs usually beat narrow stock-picking over the long run.
Keep costs as low as possible. Fees and charges steadily eat into gains, so always compare platforms and funds.
Invest regularly and consistently, letting pound-cost averaging smooth volatility.
Be wary of transfer incentives, as while cashback or fee offsets may help, they are no substitute for long-term value.
Above all, remember ISAs are for the medium to long term. Equities need at least three to five years to ride out downturns, and ISAs shouldn’t double as your rainy-day fund.
A Stocks and Shares ISA will not guarantee outperformance, but used wisely, it is one of the most effective ways to unlock better returns.
If you would like to speak with a financial adviser concerning this area please speak to your Seymour Taylor representative who will be able to refer you to a financial adviser in the area.