Are cash ISAs a bad deal

It’s the time of year when we are bombarded with advertisements about cash ISAs, each promising the best deal for savers. Yet I’ve been asked by a number of my clients whether these ISAs are worth pursuing at all.

People who have the bulk of their savings in cash ISAs or on deposit are realising that cash is not keeping pace with inflation and, in a lot of cases, is not even making 1% in interest.

With inflation at 4%, the average household has to spend an extra £1,360 a year just to maintain their standard of living, compared with only 12 months ago.

In a recent survey for watchdog Consumer Focus, more than 80% of cash ISA holders were found to be earning less than 0.5% a year on their savings.

So clients are asking if they should look at other ways to invest, in order to beat inflation. What they are considering is a fairly low-risk strategy on the stock market in
collective investments to aim for modest returns of 6 to 8% per annum over the medium to long term.

Now, they know that the stock market is risky, and I understand that it can seem a daunting step when you’ve always kept your savings in the bank. There are options, however, which match this cautious approach.

Some of my clients prefer to take a modicum of risk rather than letting their funds stagnate and let the banks and insurance companies reap the bulk of the returns.

It is important to find an independent financial adviser who listens to your concerns and searches out the best solution for you; someone with a sympathetic approach.

At Gordon Tate Associates we are committed to helping our clients make the most of their money.