Choosing the Right ISA for You, What You Need To Know

Ian Lewis[1]

Ian Lewis

Money Savings Advice Choosing the Right ISA for You

Providing a tax-free wrapper for the savings held within it, an ISA is a popular savings product that could help you make the most of your money.

There are several different types of ISA to choose from, and each type has benefits and drawbacks. To find the right ISA, ask yourself some questions that will help you to decide what you need:

Looking for other information on ISAs This guide has information on 'Choosing the Right ISA for You, What You Need To Know'. We have also writen extensively about:

We update all our guides regularly. If you are researching ISAs and we haven't got an exact guide that helps you, keep coming back as we update daily.

Can You Afford To Lose Money?

Whilst nobody wants to lose money, some people are in a comfortable position and could afford to lose some of their savings. Being able to take a few risks with your money will provide you with more opportunities.

If you don't have a lot of spare money, and you can't afford to lose any, you'll want to choose a Cash ISA as your savings vehicle. A Cash ISA works a lot like any other standard savings account, so you'll never end up with less than you deposit though your interest rate will be fairly low.

If you have enough money to take a few risks and could cope if your investments made a loss, you might choose to invest in a Stocks and Shares ISA that could offer far better returns. Investments are more likely to help your money grow than a Cash ISA with a set interest rate, but there's also a chance that your investments won't work out, and you'll end with less money than you started with.

What Is Your Attitude to Risk?

Assuming that you're happy to take financial risks, you could choose to invest in a Stocks and Shares ISA or offer peer-to-peer loans with an Innovative Finance ISA. Both of these options could result in a loss, though a majority of people get back a lot more than they've paid in.

If you're happy with some risk but want to play things fairly safe, you can choose to invest in Stocks and Shares but with a low-risk portfolio. Though there's still a chance you could lose money, with a safe portfolio, the risk is much lower, and you're more likely to see financial growth. Unfortunately, a safer portfolio also means that growth will be smaller.

If you're happy to take a bigger risk with your money, expect a wider swing either way. You could lose a lot more money with high-risk investments, but if they're successful, then you could come away with much more money than you first paid in.

What Do You Plan To Use the Money For?

If you specifically want to use your savings as a deposit for your first home, or if you're saving for your retirement and won't need to access your savings sooner, then you could benefit from a Lifetime ISA with 25% bonus payments. You can pay up to £4,000 per year, with the government adding up to £1,000 as an annual bonus for your savings.

A LISA is a very effective way to save, but your money can only be used to buy a property or accessed once you've turned 60. If you want to use your money for anything else or don't want to limit your options. It's best to choose a different type of ISA for your savings.

How Long Do You Want To Save For?

With a Flexible Cash ISA, you can access your money almost instantly. If you might need to withdraw cash for emergency expenses, this is the best option to choose. A Flexible Cash ISA is the ideal choice for people with limited spare cash, who hope to be able to save for a long time but could need to access savings very suddenly.

If you can save your money for a couple of years and won’t need to dip into your savings, a Fixed Term Cash ISA could be the best way to earn interest. Interest rates are higher for these Cash ISA products, but your money’s locked away for an agreed length of time, and there are charges for early withdrawals.

If you don’t expect to need your money for a while, you could also choose a Stocks and Shares ISA. The best way to take advantages of stock market investments is to ride the rollercoaster long-term. Your investments will go through periods of loss and times when your returns are much higher, and your best chance of success is to hold out until the initial waves have properly subsided.

Withdrawing money too early can result in losses, and this is a common problem when people panic at the first sign that they’re losing money. If you can invest your money for several years, you could get great returns from Stocks and Shares.

How Old Are You?

Most ISA products are available to everyone over 18. The exception is the Lifetime ISA or LISA. You can only open a Lifetime ISA between the ages of 18 and 39. On your 40th birthday, you’re no longer eligible for this particular product.

How Much Do You Want To Save Each Year?

The Lifetime ISA has an annual limit of £4,000. If you want to pay in more than this, you’ll need a different ISA product.

You have a personal ISA Allowance of £20,000 per year. This is spread across all ISA products, so you can have multiple ISAs but can only deposit up to £20k in total.

You can combine different ISA products to maximise interest and returns. If you put £4,000 into your lifetime ISA, you’ll still have a £16k allowance remaining for other ISA products that you hold.

Do You Want More Than One ISA?

Many people choose to mix and match ISAs. If you’re a young person saving for your first home, you might want to use a Lifetime ISA to save up to £4,000 per year. You might also want a Cash ISA to make use of the rest of your £20k annual allowance. With this combination, you’ll be able to access the 25% annual LISA bonus whilst also enjoying tax-free interest earned on your Cash ISA savings.

Other combinations of ISAs also bring their own benefits. You might like to save some money in an accessible Cash ISA, where it’s easy to withdraw and where there’s no risk of loss, whilst also putting money in a Stocks and Shares ISA if you’re able to invest some long-term. There’s always a safety net with this combination, but your Stocks and Shares ISA could perform very well and lead to better annual returns.

You can have different types of ISA and hold several accounts at one time. As long as you don’t go over your annual ISA limits, you can mix and match to meet your needs.

How Can Money Savings Advice Help You if You Are Thinking About Investing in an ISA or Stocks & Shares ISA?

Here at Money Savings Advice, we have partnered with some of the UK’s leading ISA & Stocks & Share ISA Investment companies. They have already helped thousands of people invest safely and they can do the same for you.

Choosing an independent investment company means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these investment specialists, then click on the below and answer the very simple questions.


Money Savings Advice Author Ian Lewis

Ian Lewis

Ian Lewis is one of our specialist financial writers. Ian has over 15 years of financial writing experience, having worked for some of the largest financial publications in the UK covering topics from mortgages, equity release, loans and financial claims, to name a few.

How does Money Savings Advice work

Money Savings Advice is an independent editorial company providing detailed information about numerous financial niches with the aim of helping consumers make informed financial decisions. We aim to provide hints, tips and techniques to help you make your money work for you. However, we are not perfect, and we accept no liability if anything we write about goes wrong.

  • The information detailed on Money Savings Advice does not constitute financial advice. It is always advised to do your own research to make sure the product/solution we write about fits your circumstances.
  • The aim of Money Savings Advice is to match you with a financial advisor, claims management company or another financial service company that can help you with your financial needs.
  • Money Savings Advice aim to provide the most up to date and accurate information about all financial subjects, and as such we sometimes link to other websites, but we (Money Savings Advice) can’t be responsible for their content.
  • Money Savings Advice is independent and not linked to any financial company.


Who are Money Savings Advice

Money Savings Advice is a trading name of RMM Digital Publishing Ltd. Registered trading address, First Floor, 85 Great Portland Street, London, W1W 7LT. Trading in England and Wales, company number 11550143 with data protection number ZA747669.

Back to top