Just how much cash will you be able to hold in your ISA from next year and what will it cost you to do so? At first sight, new rules for individual savings accounts (ISAs) due to come into force from 6 April 2027 look straightforward. In practice, they are likely to prove anything but, thanks to tricky new regulations published this week.

The confusion stems from changes announced in last November's Budget. Chancellor Rachel Reeves stressed her determination to use the tax system to encourage risk-taking investment into UK companies and infrastructure; she therefore announced that from the 2027-2028 tax year onwards, the annual limit on investments into cash ISAs – where your money is simply held in a risk-free bank or building society account – will fall to £12,000. By contrast, the annual stocks and shares ISA allowance – where your money flows through into productive investments – will remain at the full £20,000.

So far, so good. But what about cash held in a stocks and shares ISA? You're also entitled to hold cash in these accounts. Perhaps you're concerned about market volatility, or think you might need to make a withdrawal soon; maybe you just want to maintain a small cash balance to fund fees and investment charges; you may even have opted to take dividends from existing holdings in cash, potentially to be invested later on.

Moreover, what about cash-like investments in a stocks and shares ISA? Opting for a money-market fund, say, is akin to holding your ISA savings in cash, even if you're technically making an investment.

Reeves's new ISA changes will affect everyone

These complexities have prompted some head-scratching at the Treasury, which delayed publication of the detailed regulation on how the new rules will apply to stocks and shares ISAs until earlier this week. Now, however, it has published an “anti-circumvention rules fact sheet” that is more demanding than many had expected. Most strikingly, the Treasury plans to introduce a new tax on interest earned on cash held in a stocks and shares ISA, even though the tax-free nature of money held in such accounts is meant to be sacrosanct. A 22% tax charge will apply, in line with the rate of savings interest tax, from April 2027 onwards.

While a similar arrangement operated in the UK until 2014, some ISA providers believe the change will fundamentally undermine the tax efficiency of ISAs. Providers will no longer be able to describe all ISAs as tax-free in order to encourage savers and investors, they say. Some ISAs will be more tax-free than others.

The Treasury has also confirmed plans to restrict savers from holding cash-like investments in their stocks and shares ISA. Money-market funds will not qualify for ISAs if they account for the entirety of the investor's stocks and shares ISA portfolio; ISA managers and platforms will then be forced to intervene.

There will also be a veto on transfers of money into a cash ISA from holdings in a stocks and shares or innovative ISA, which is currently allowed. Again, while the goal is to stop investors getting round the new rules, one result will be to limit financial planning and constrain the flexibility of investment strategies.

This will affect everyone. In last November's Budget, the Treasury said savers and investors aged 65 or over would be exempt from the lower annual allowance on cash ISAs, maintaining their full £20,000. The thinking is that older people are often in a phase of running down their savings and may therefore need to take a more risk-averse approach to managing their money. This week, however, the Treasury revealed that the over-65s won't be exempt from the ban on investing an entire stocks and shares ISA in money-market funds, or from the moratorium on transfers to cash ISAs.

All of which adds a great deal of complexity to the ISA rules – and plenty of scope for adverse outcomes for investors. Plus, ISA providers themselves will muddy the waters. JPMorgan Personal Investing, for example, has already announced that, from this week onwards, it will no longer pay interest on cash held in a stocks and shares ISA if an investor's entire pot is held in cash. The move is in line with the intent of the Treasury's thinking, but will naturally save JPMorgan Investing some money. And previously, the Financial Conduct Authority has warned the whole ISA industry about paying poor interest rates on cash held in a stocks and shares ISA.

Elsewhere, ISA providers – including leading online platforms – are already beginning to rethink their policies on what they will and won't allow investors to do. They will want to get ahead of restrictions and may simply withdraw certain products and services completely. Maybe they'll no longer allow investors to receive cash dividends, for example, requiring everyone to use accumulation funds.

Will Reeves stay chancellor long enough?

All of which is a reminder of how strongly the law of unintended consequences applies in the world of tax. The desire of the Treasury to shift money out of cash ISAs into stocks and shares accounts that are seen as more supportive of economic growth is understandable – the most recent official statistics reveal investors put £69.5bn into the former in the 2023-2024 tax year against only £31.1bn in the latter. But more doubt and complexity may simply put people off, reducing the size of the whole pie.

There's one final unknown, meanwhile. This scheme is the brainchild of Rachel Reeves and her team. But will she remain chancellor long enough to finalise the remaining details – a short technical consultation will take place between now and the autumn – let alone to see it come into operation next April? Maybe a different chancellor will want to do something completely different.

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Investors will face a charge on any interest paid on cash in a stocks and shares ISA, the Treasury has confirmed in its latest guidance on ISA reforms.

Plans are underway to reduce the cash ISA allowance to £12,000 per year from April 2027 for savers under age 65.

The Treasury is also disincentivising holding uninvested cash in a stocks and shares ISA and restricting how much can be held in cash-style products within this type of ISA.

It has confirmed plans for a 22% charge on any interest or alternative finance return paid on cash held within a non-cash ISA, from April 2027. This may be money that account holders haven’t invested yet or from dividends paid out.

But in some good news for investors, money market funds will be allowed in a stocks and shares ISA as long as they do not make up 100% of the investments.

Common investments held in stocks and shares ISAs such as individual shares, funds, investment trusts, exchange-traded funds and corporate and government bonds, including UK gilts, will not be treated as cash-like assets, the Treasury said.

James Carter, head of platform policy at Fidelity International, said: “We are pleased to see that cash-like investments will remain eligible for non-cash ISAs.

“These products are genuine investment products, holding short-term government and high-quality debt, and form a valued part of many balanced portfolios. Removing them from the stocks and shares ISA framework would have undermined the government’s objective of encouraging more people to invest, by giving customers a cliff edge choice between staying in cash or moving directly into higher-risk, more complex products.”

New restrictions on transfers into cash ISAs

Transfers from stocks and shares ISAs into cash ISAs will not be permitted but it will be allowed the other way round.

Individuals aged 65 and over will still benefit from a higher cash ISA limit of £20,000 per year, if they wish to use the full annual ISA allowance for that type of account.

The transfer restriction will be stopped from this point but the charge on interest earned on cash in a stocks and shares ISA and the prohibition on 100% cash-like investments will remain in place.

A technical consultation is due to be released by the Treasury on how the charge will work.

Greg Davies, head of behavioural finance at Oxford Risk, has already warned that the measure risks backfiring.

He said: “Getting people invested is an inherently behavioural challenge. You do not encourage nervous savers into investing by making the first step feel more complicated, more punitive and harder to reverse.

“People move from cash into markets when the journey feels clear, safe enough, and matched to their goals, time horizon and financial circumstances. Adding tax charges and transfer restrictions to an already confusing ISA system sends precisely the wrong behavioural signal.

“For many would-be investors, this will not create confident investors. It will create more hesitation, more disengagement, and more people doing nothing.”

Rachel Vahey, head of public policy for AJ Bell, warned that the changes are “increasingly complex” and “riddled with unintended consequences” and may mean people just keep money in cash ISAs instead.

She said: “The new rules mean a charge of 22% will be applied to interest paid on cash in investment ISAs. This is a flat rate charge, meaning the same rate applies whether the ISA account holder is a basic rate taxpayer, higher rate taxpayer, or indeed doesn’t pay any income tax.

“The ISA holder cannot invest 100% of their (non-cash) investment portfolio in money market funds, or that would be classed as a ‘non-qualifying’ investment. This means they could invest 99% in money market funds and 1% in, say, UK equities and that would be allowed.

“It also means they could hold 50% of their portfolio in cash, but if the remaining 50% was held in money market funds that wouldn’t be allowed. Whereas if they held 49% in money market funds and 1% in UK equities, this would be permitted under the rules.”

Will investment platforms stop paying interest on cash?

Several investment platforms such as Bestinvest, AJ Bell, interactive investor, Fidelity and Hargreaves Lansdown pay interest on cash held within a stocks and shares ISA.

The rates are not that competitive but the benefit for investors is that they can get cash in the wrapper or receive dividends and decide how they want to invest it.

It is currently unclear if platforms will stop paying interest or if investors will just need to be aware of the charge.

Carter said: “We have consistently welcomed the government’s recent focus on encouraging more people to invest, supporting better long-term outcomes. Recent initiatives such as a review of risk warnings, the introduction of a targeted support regime, and an education campaign on the benefits of investing, will all help to reset the approach to risk and bridge the gap between precautionary cash savings and long-term investment.

“We look forward to the publication of the technical consultation which will include further details required to enable providers to implement these changes.”

A spokesperson for AJ Bell was unable to comment on whether the platform will stop paying interest on cash.

Jason Hollands, managing director of Bestinvest, described the anti-circumvention measures as a "disproportionate response to a problem that may never meaningfully materialise."

He added: "Investors will also need to weigh up the relative difference in returns on a money market fund minus any platform fees, versus holding cash and having the 22% charge deducted."

MoneyWeek has asked Hargreaves Lansdown and interactive investor for comment.

Investment platforms are starting to stop paying interest on uninvested cash.

It comes ahead of the changes to ISA rules from April 2027.

Chancellor Rachel Reeves used her 2025 Autumn Budget to reveal new restrictions on cash ISAs in an attempt to encourage more people to invest rather than keeping their money in cash.

From April 2027, under-65s will only be able to put up to £12,000 into a cash ISA each tax year, down from the current £20,000 that can be used across the tax wrapper. They will still have the overall £20,000 annual ISA allowance, so if they put £12,000 into a cash ISA, the remaining £8,000 could go into a stocks and shares ISA.

Transfers from stocks and shares ISAs to cash ISAs will also be banned as part of the changes.

Plus, HMRC has said it will introduce a charge for those earning interest on cash within a stocks and shares ISA.

The aim is to disincentivise investors from keeping cash holdings in a stocks and shares ISA for a long time and instead encourage them to put the money back into the market.

For now, many of the major investment platforms are still paying interest on uninvested cash.

But J.P Morgan Personal Investing appears to be getting its investors ready for the changes now.

Cash pot changes

It may be tempting to keep money in cash while you decide where to invest, especially if you are earning some interest.

But the Treasury wants to get more people investing, ideally in UK stocks, so the new charge aims to provide a disincentive as it could outweigh any interest earned.

HMRC is due to consult on the changes.

While not explicitly linked to the reforms, J.P Morgan Personal Investing has unveiled plans to remove the interest paid on cash-only pots.

Currently, the robo-wealth manager pays the Bank of England base rate minus 2.5% on its cash-only pots.

This is money that investors can use to drip-feed funds into their portfolio or to protect your balance from market movements ahead of a withdrawal.

It is separate to cash held in the investment pot that goes towards management fees. Interest on this cash is currently paid at the base rate minus 0.75%.

But from 22 June, J.P Morgan said cash-only pots will no longer accrue interest.

Instead, cash‑only pots will remain available for holding cash and drip feeding money.

Any interest accrued up to but not including 22 June 2026 will be paid into your pot at the end of the current quarter.

Interest will still be paid on cash held in your investment pot.

Can you still earn interest on uninvested cash in a stocks and shares ISA?

Most other investment platforms are still paying interest on cash for now.

BestInvest pays a relatively decent 2.98% interest on cash holdings within any of your investment accounts.

Its managing director Jason Hollands said there are no plans yet to change the way cash is treated in its stocks and shares ISA, while HMRC has yet to firm up its plans.

In contrast, AJ Bell’s stocks and shares ISAs, lifetime ISAs, and junior ISAs pay 1.75% interest on all cash balances.

The interest paid can also depend on the amount being held.

For ISAs and junior ISAs, interactive investor now pays 1.11% on the first £20,000, 1.26% on the value between £20,000 and £50,000, 1.36% between £50,000 and £100,000, and 2.21% on the value above £100,000.

Hargreaves Lansdown users can earn 1.51% on cash balances between £0 and £19,999, 1.18% between £20,000 and £99,999, 2.02% between £100,000 and £999,999, and 2.38% on balances worth £1 million and higher.

MoneyWeek has asked the major platforms what there plans are once a charge is introduced.

The new tax year has begun, and with it comes a fresh £20,000 annual ISA allowance. But should you use this allowance right at the start of the year, or leave it later?

As well as knowing where to invest, and making sure you select the best funds and stocks for your portfolio, the timing of your ISA contributions will have a significant impact on your returns over time.

Analysis shows that early bird ISA investors who make use of their ISA allowance from the start of the tax year tend to do better than those who invest at the last minute.

Analysis from asset manager Vanguard shows that a hypothetical investor who invested their entire £20,000 allowance on 6 April 2025, and did the same at the start of each subsequent tax year, would see their pot grow to £1,079,320 by the end of the 25th year (assuming a 5.5% annual return after fees).

Waiting until the end of each tax year to invest the £20,000, though, would leave the same investor with £1,023,052 – around £56,000 less, just by virtue of waiting until the end of the tax year.

“Time in the market really matters,” said James Norton, head of retirement & investments at Vanguard. “We see that many people rush to max out their ISA allowance at the end of a tax year, rather than at the beginning, missing out on almost a year of tax-efficient returns.

“The key is to make your money work for you as early as you can, in a way that fits your circumstances,” Norton added.

Over the entire history of ISAs, since their introduction in 1999, early bird ISA investors could be £83,000 better off than last-minute investors, according to analysis from investment platform InvestEngine.

Putting the £20,000 annual ISA allowance into the MSCI ACWI Net Total Return (GBP) index at the start of every financial year since April 1999 would have built a pot worth £1,277,963, compared to the £1,195,127 that the same contributions would have grown to if made at the end of each year.

“With the new lower cash ISA limit set to come in next year, those considering a stocks and shares ISA for the first time could benefit by starting early with their investments. Even small amounts can make a big difference over time.”

How do early bird ISA investors perform compared to regular monthly investors?

Meanwhile, asset manager Fidelity International compared three approaches to ISA investing: using the entire ISA allowance at the start of the tax year (Early), using it all at the end of the year (Late) or drip-feeding the allowance through monthly across the course of the year (Regular monthly).

Again, the best approach was to invest the entire allowance at the start of the year, based on historic returns of the FTSE All Share Index:

^{Source: Datastream, Fidelity International, 05/04/2001-06/04/2026 Total return in GBP of FTSE All Share}

^{Source: Datastream, Fidelity International, 05/04/2016-06/04/2026. Total return in GBP of FTSE All Share}

“For many people, investing regularly can make the process feel more manageable,” said Marianna Hunt, personal finance expert at Fidelity International. “It helps reduce the pressure of trying to time the market and can take some of the emotion out of investment decisions.

“What matters most is making use of your ISA allowance and maintaining a long-term focus,” Hunt added.

A group of 270 UK individuals are part of an exclusive community that is technically open to everyone in the country, if you have the time, money and investment performance to join – the £2 million ISA club.

The figure, revealed in a Freedom of Information request to HMRC by financial planning firm Bowmore Wealth Group, showed just what is possible if you take your ISA savings ultra seriously over the long term.

By investing the full annual ISA allowance of £20,000 – equivalent to £1,666 a month – in a stocks and shares ISA and achieving an average annual return of 7%, investors could build a £2 million tax-free portfolio over three decades, according to Bowmore’s calculations.

John Clamp, chartered financial planner at Bowmore, said: “Reaching a £2 million ISA pot is no longer an unrealistic ambition for investors and could be achieved tax-free in as little as 31 years with consistent investing.”

We look at some of the best stocks and shares ISAs in a separate article.

The benefits of long term investing

The findings highlight the growing importance of ISAs as a long-term wealth-building tool, particularly as more savers look to make the most of tax-free returns.

However, Bowmore warned many investors risk falling short of their goals by holding too much in cash ISAs for too long or by dipping into their savings prematurely.

While cash ISAs may appear to offer security, their lower returns can significantly slow wealth accumulation over time – often shrinking in real terms due to inflation. In contrast, investing in equities can dramatically accelerate long-term growth, particularly when returns are compounded.

Clamp said: “ISA millionaires are becoming increasingly common but the next milestone – the £2 million ISA – is already within reach for many investors who take a long-term view.”

“The real difference comes down to behaviour. Consistently investing the full allowance and allowing returns to compound over time can turn what seems like an ambitious target into something very achievable.”

From £1 million ISA to £2 million ISA

Separate research by investment platform AJ Bell found it takes 25 years of saving £1,433 a month – or £17,196 a year, less than the £20,000 annual allowance – to build up a £1 million ISA. But it only takes a further 10 years to make it to the £2 million mark. This is assuming you get 6% growth on your investments.

Laith Khalaf, head of investment analysis at AJ Bell, said: “It’s no walk in the park to build up a million pound ISA, but once you get there, hitting new milestones becomes increasingly easy because you have a huge tailwind from growth on the money you’ve already stashed away – known as compound growth.”

He added: “Compound growth is a formidable force, though you do have to be diligent and patient to harness its power. Clearly the higher the return you achieve on your investments, the more powerful the effect of compound growth on your wealth.”

Over the long term, then, a cash saver is likely to see a weaker compounding effect than an investor putting their money into the stock market, though the investor will of course see greater fluctuations in the value of their holdings along the way.

Effects of compound growth

“Compound growth is a wonderful thing when you break it down,” said Khalaf. “Even to reach your first million pounds in 25 years, you would only need to save less than half of this sum, or £429,900, because the remainder would be made up by growth on the savings you make (assuming 6% net fund growth).

On this basis, after 12 years of saving £1,433 a month, your annual ISA fund growth is already exceeding the £17,196 you’re putting away each year. This effect gets turbocharged the more you save, because of the growth on the pot of money you’ve already built up.

Khalaf said: “This explains why it only takes 10 years, rather than 25 years, to save your second million. In other words, it’s 2.5 times easier to save your second ISA million than your first.”

This is reflected in the amount you need to save as well. To get from £0 to £1 million in 25 years you need to stump up £429,900. But to get from £1 million to £2 million by saving £1,433 a month, you would only need to stash away £171,960 yourself.

Over a decade of saving, you would receive £859,189 in growth, because not only are your new savings growing, but so is the million pounds you’ve already built up in your ISA.

Source: AJ Bell, based on 6% net fund growth per annum. Numbers do not add to round millions as they have been calculated based on whole years of saving.

To get to your third million would only take a further six years of saving £1,433 a month. During this time you would only need to stump up £103,176 in savings, with £874,067 accruing in fund growth.

In total that means 41 years of saving £1,433 a month to get to £3 million.

“If you are in the fortunate position to be able to do that, over the course of those 41 years, you would have stashed away £705,036, with the remaining £2,303,414 coming from fund growth,” Khalaf pointed out.

Investors are being urged to consider consolidating their stocks and shares ISAs onto one investment platform, but there are risks to be aware of.

With the end of the tax year approaching, investors have just weeks to make use of their ISA allowance and there are also plenty of cashback incentives around to transfer your tax-free savings from previous years.

Research by interactive investor found a third of investors currently have more than three different providers holding their ISA or pensions and almost half have two.

The platform claims investors with a £75,000 portfolio split between three providers, could save £844 over a five-year period by consolidating into a single account with interactive investor, which charges a flat fee rather than a percentage of the portfolio's value.

This assumes investment growth of 5% per annum and a £25,000 investment with three providers: Hargreaves Lansdown, AJ Bell, and interactive investor.

There are other factors to consider though such as trading fees, the product range on offer and functionality such as apps and research tools as well as customer service.

Other investment platforms may even work out cheaper, depending how much you invest and how regularly you are trading shares or funds.

For example, interactive investor’s cheapest plan starts at £5.99 per month or £71.88 a year.

But Scottish Widows Share Dealing, formerly IWeb, which is owned by Lloyds Banking Group, doesn’t charge any annual or ongoing fees. Trades cost £5 each.

Aside from fees, there are other factors to consider if you plan to consolidate your ISA.

Why consolidate your ISA?

Consolidating your ISA can mean paying one fee, which ideally should work out cheaper

It also give you a more complete view of your finances.

Brian Byrnes, director of personal finance at Moneybox, said: “The biggest win for consolidation is simplicity. With a single provider, you don’t have to juggle multiple accounts, passwords, and apps.

“On top of this, a single view allows you to see your progress instantly. It’s simpler to know exactly how much you have saved for your house deposit, your emergency fund, or your retirement when it’s all on one dashboard. This visibility helps you stay motivated and make faster, more informed financial decisions.”

Consolidating your ISA gives you more control and helps avoid duplicate holdings.

Plus it can help set a clearer strategy.

Ben Faulkner, of EQ Investors, said: “Bringing a portfolio together helps you check you’re properly diversified and haven’t invested more in some areas than you’d intended.

“You may want to invest in companies that are environmentally and ethically aware and look after their employees, but are you confident all your investments follow this approach?

“Consolidating your ISAs can help to ensure your aligning investments with your personal values.

Another benefit is estate planning for inheritance tax.

Rachael Griffin, tax and personal finance expert at Quilter, said: “With the government confirming that pensions will fall within the scope of inheritance tax from April 2027, consolidating financial accounts is likely to become more important for many families.

“This change means more estates will be pulled into inheritance tax and a single, well‑organised ISA structure will make life far easier for executors working through IHT reporting requirements.”

What to watch out for when consolidating an ISA

There may be downsides to consolidating though, particularly if there are exit fees.

Griffin says cost savings are possible, although not guaranteed.

She said: “Some platforms favour larger portfolios with flat fees, while others suit smaller balances with percentage charges. Consolidation only pays if the chosen platform’s structure is genuinely cheaper once everything is under one roof.

“The potential downsides are mostly practical. Exit fees, loss of preferential fund classes and the risk of being out of the market during a transfer all need weighing up. Not all assets can transfer in specie, and specialist holdings may not be fully portable.

Nouran Moustafa, practice principal at Roxton Wealth, says people need to watch carefully for exit fees, transfer costs, loss of access to certain funds or tax wrappers, and the risk of ending up less diversified than they were before.

She said: “The key is to consolidate with purpose, not just for convenience, and to make sure the new home is genuinely better, not just tidier.”

With the end of the 2025/26 tax year approaching on 5 April, now is the time to make full use of your current £20,000 ISA allowance and start thinking about what to do with the next allowance when it resets on 6 April.

Stocks and shares ISAs provide investors with a home to grow money free of any tax on the gains, which can be significant. Those who invested the full ISA allowance every year into the FTSE All-Share Index from when ISAs launched in April 1999, for example, would have a portfolio worth £665,696 over the 26 years to April 2025, according to calculations by Interactive Investor (having contributed £326,560).

Picking the right investments for your stocks and shares ISA portfolio is key – ideally you should balance your attitude to risk, the types of investments you already hold and where you are in your investment learning curve.

MoneyWeek asked investment experts at fund platforms Fidelity International and Interactive Investor for their top ISA fund and ISA investment trust picks, to suit different types of investors.

Investing for growth

Growth investing is a strategy focused on capital appreciation – that is buying stocks in companies expected to grow in value at an above-average rate compared to the wider market.

Tom Stevenson, investment director at Fidelity International, who recently featured on the MoneyWeek Talks podcast, said: “Growth investing requires patience and a long-term mindset. Market volatility is inevitable, but staying invested and diversified gives your money the best opportunity to compound over time.”

From Fidelity’s Select 50 list, he highlighted four funds that offer different approaches to growth investing:

Dodge & Cox Worldwide Global Stock fund – a value-oriented global equity fund investing in established companies that appear undervalued but have strong long-term prospects. Its diversified international approach provides broad exposure beyond the largest US technology names.

Rathbones Global Opportunities fund – a concentrated global growth strategy targeting companies with durable competitive advantages and strong expansion potential. The fund focuses on identifying businesses with distinctive qualities and the ability to sustain growth.

Federated Hermes Asia ex-Japan – a regional fund investing in attractively valued Asian companies outside Japan. The manager seeks quality businesses that are currently out of favour but offer strong long-term upside potential.

Vanguard Global Small Cap Index fund – a passive strategy providing exposure to thousands of smaller companies across developed markets. Smaller companies can be more volatile, but they have historically offered attractive long-term growth potential for investors with a longer time horizon.

Reliable returns

Stocks and shares ISA investors seeking a reliable return might look at global equity income funds. Investing in dividend-paying companies across the globe, they have the potential for a growing income stream alongside long-term capital growth.

Global equity income funds often lean towards financially robust, well-managed businesses, a great match for anyone who loves the idea of steady earnings but still wants exposure to global markets.

Dzmitry Lipski, head of funds research at Interactive Investor, suggested the Fidelity Global Dividend fund, which has been managed by Dan Roberts since its 2012 launch, drawing on more than two decades of dividend-investing experience.

“It invests in companies globally that offer a healthy dividend yield and the potential for capital growth and aims to generate roughly 25% more income than its benchmark,” said Lipski.

The portfolio holds around 46 large, resilient companies, with Europe representing roughly 48%, North America 26% and the UK 15%, and no Chinese exposure. Lipski said: “Sector allocations are deliberately defensive, led by financials, industrials and consumer staples.”

Alternatively, Jemma Slingo, pensions and investment specialist at Fidelity International, said she likes Pyrford Global Total Return – about two thirds of the portfolio is in high quality bonds, and a third is in equities.

“It tries to keep volatility low, while providing a stable stream of inflation-beating returns,” she said. Slingo said that, while at first glance at the fund’s performance chart reveals few serious falls, “on the flip side, growth has been fairly muted particularly when inflation is accounted for”.

Pyrford has turned an initial investment of £1,000 into £1,440 over the course of the decade. If you want a ‘sleep at night’ option, however, this might be a trade off you’re willing to make.

Stevenson, from Fidelity International, added: “Dividend and interest allowances have reduced significantly in recent years, so sheltering income-producing investments from tax in an ISA can improve the net yield you receive.

“Income investing doesn’t mean sacrificing growth altogether. Many income funds aim to provide a balance of regular distributions and long-term capital appreciation.”

From Fidelity’s Select 50, Stevenson’s three picks offering diversified sources of income are:

M&G Corporate Bond fund – a fixed interest fund investing primarily in investment grade corporate bonds, with the flexibility to hold government and high yield debt.

International Public Partnerships Ltd (LON:INPP) – a specialist infrastructure investment trust investing in essential assets such as schools, hospitals, transport and renewable energy projects. These assets typically benefit from long-term contractual cash flows.

Ninety One Diversified Income fund – a multi-asset income fund investing across bonds, dividend-paying equities, infrastructure and property. Managed with a focus on limiting volatility relative to the UK stock market, the managers John Stopford and Jason Borbora-Sheen have a long track record running this strategy and have successfully been able to limit capital losses while providing a steady yet growing income.

Adventurous diversification

With global stock markets becoming increasingly concentrated and growing fears of the AI theme potentially being overheated, those wanting to spice up their stocks and shares ISA portfolio with some interesting diversification could take a look at investment trust Murray International.

Kyle Caldwell, funds and investment education editor at interactive investor, said he likes the trust because he is “looking more towards those investment trusts that use their full global remit in having a good chunk of exposure to Asia Pacific and Latin America – Murray International ticks this box”.

The portfolio is very different from the wider market. It has a value investment style, and it offers an above average dividend yield of around 4%, Caldwell pointed out.

Fidelity’s Slingo is also concerned about the stock market being dominated by a handful of US technology stocks – and also likes Latin America and Asia, but this time in the form of the Lazard Emerging Markets fund.

“The fund seeks out companies that are cheaper than the market but that have better fundamental prospects,” she said, adding emerging markets were among the best performing equity assets last year and the outlook remains positive.

“Strong earnings growth, a weak US dollar and a rotation out of the US could all boost performance this year,” Slingo said.

Newer investors

For newer investors who would like something a little more interesting than a global tracker fund and who are nervous about jumpy markets, the Fidelity Global Dividend fund could be a good option.

“It invests in companies from around the world; offers a combination of growth and income; and aims to keep volatility lower than the wider market. The fund has delivered steady gains over the past 10 years,” Slingo said.

The fund contains some well-known names like Unilever and National Grid, Slingo added, so “new investors will know that buying the fund means buying real businesses that impact them”.

Alternatively Lipski at Interactive Investor highlights a managed solution, like Interactive Investor’s Managed ISA, might be a good place to start, where the investments are chosen for you.

Investors fill out a questionnaire and are matched with one of 10 portfolios – in two styles (index investment style and sustainable investment style) and five different levels of risk. Once invested, the portfolio is periodically rebalanced – in line with the risk level you signed up for.

The fund fees are low, and there is no separate management fee as it sits within Interactive Investor’s existing flat-fee subscription-based charging model.

We look at the best investment funds for beginners and the best investment platforms for beginners in separate articles.

A less experienced investor may also want to look at absolute return or capital preservation funds. They use a mix of strategies to limit volatility and help protect against big downturns.

Lipski suggested looking at the Trojan Fund: “Co-managed by Sebastian Lyon and Charlotte Yonge, Trojan Fund takes a conservative, disciplined approach focused on preserving capital and delivering long-term real returns,” he said.

Lyon invests across a broad range of asset classes. The equity portion is focused on large, financially robust companies in developed markets, particularly the UK and US. The fund also holds high-quality sovereign and inflation-linked bonds as defensive assets, alongside a strategic allocation to gold. Cash is also used meaningfully to protect capital and allow swift investment when opportunities arise.

“The fund offers a steady, defensive option for investors seeking long-term real returns with controlled risk,” said Lipski.

Experienced investors

More experienced investors may want to consider smaller companies for their stocks and shares ISA. “These can be significantly riskier than large ones,” Fidelity’s Slingo pointed out, “however, experienced investors with long time horizons might want some exposure to this part of the market”.

Slingo suggested the Brown Advisory US Smaller Companies fund. “It deploys a big team of researchers to find the most promising smaller companies listed in the US. Their strategy is based on the belief that good fundamental research coupled with a long-term approach can generate attractive outperformance,” she said.

The fund is a higher risk option, and its performance has lagged the benchmark in recent years. “However, it may appeal to experienced investors who are concerned about the dominance of huge US tech stocks in their portfolios,” said Slingo.

Finally, according to Dave Baxter, senior fund content specialist at Interactive Investor, another good option for the more seasoned investor is the Marlborough Special Situations fund.

It invests in the dynamic growth potential of the UK’s innovative and agile smaller companies. Its sector bets are markedly different with big weightings to industrials, consumer discretionary shares and technology. Top holdings include Zegona Communications, Boku and SCA Investments.

Baxter said: “Marlborough Special Situations has been poor in 2025, and in recent years. The fund has more than 150 holdings and small position sizes, with its top holding making up only 2.6% of the portfolio.

“However, the fund has a good long-term record, and good exposure to micro caps, small caps and mid caps. It should in theory do better when interest rates fall in earnest.”

The allure of a 25% government top up was enough to persuade me to open a Help to Buy ISA in the late 2010s.

But fast forward to 2025 and I’ve decided to do away with the account and put my money elsewhere.

Having moved into my partner’s property last year, and therefore no longer looking to buy a first home, the account was effectively redundant.

Without the 25% bonus, and offering a paltry interest rate of 2.5%, I was losing money in real terms, based on the latest CPI rate of inflation.

Instead, I’ve put 80% of the Help to Buy money into a taxable cash savings account and transferred the remaining 20% into a stocks and shares ISA.

My cash savings account is currently paying over 4% in interest, offering far more than the Help to Buy ISA.

The interest I’ll make from the cash savings account will be well within my personal savings allowance for the 2025/26 tax year. At some point, I will transfer some or all of the money from this savings account into a cash ISA though, to protect it from the taxman.

The 20% I am adding to the stocks and shares ISA is an amount I can afford to lose. Because it’s in an ISA, any returns will be shielded from capital gains, dividend and income tax.

Moving the Help to Buy ISA money into cash savings and a stocks and shares ISA will mean my money will work harder and my returns should be stronger over the long-term.

I considered opening a Lifetime ISA, which also offers a 25% bonus from the government, as you can invest in stocks and shares with these accounts.

However, you only get that bonus if you’re buying a first home (which I no longer am) or withdrawing the money after the age of 60. If you withdraw your cash and it’s not for either of these two reasons, you are faced with a hefty 25% penalty.

I wanted a tax-wrappered account offering more flexibility than this, in case I want to withdraw my money earlier than 60 penalty-free – a stocks and shares ISA allows me to do this.

Millions ‘trapped’ with Help to Buy ISAs

More than two million savers are still stuck with Help to Buy ISAs, a recent Freedom of Information request made by comparison site Finder found.

These savers will not be able to add more money into their accounts after November 2029 and from November 2030, can’t claim the 25% bonus.

To qualify for the 25% bonus, you need to buy a house costing no more than £250,000 outside of London and £450,000 inside the capital. These limits have not changed since the Help to Buy scheme launched in December 2015, despite house prices rising by around 45% between September 2015 and September 2025, according to Land Registry data.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said the Help to Buy ISA could be a ‘real shot in the arm’ for would-be home buyers, but savers who no longer need to get on the property ladder will likely do better putting their money elsewhere.

“If your plans have changed, and you’re no longer buying, this account essentially becomes a savings account with a monthly cap.

“Given that the best rate on offer right now is 3%, it’s not a particularly competitive savings account, so a cash ISA would be a more sensible option. If you want the money for a longer-term goal, you might be better off with a stocks and shares ISA.”

Cuts to cash ISA allowance as Reeves pushes for an investment culture change

Rachel Reeves confirmed in the Budget the cash ISA annual allowance limit will be reduced from £20,000 to £12,000 for under 65s from April 2027. Savers will still retain the overall £20,000 annual ISA limit.

The chancellor is seeking to push more savers towards investing their money rather than relying on the less risky but typically less lucrative option of cash savings.

Her attempts to shift people’s attitude towards riskier forms of saving may not bear fruit though, research suggests.

Polling by AJ Bell found 51% of cash ISA savers would simply put their money into a taxable savings account following a cut to the annual cash ISA allowance.

However, while stocks and shares ISAs are a riskier way of saving, returns are often greater than stashing the cash away in a taxable savings account or cash ISA – if you’re looking to invest over a longer-term period of five years or more.

Analysis from AJ Bell shows a one-off £1,000 investment in the average North America fund back in April 1999, when ISAs were first introduced, would now be worth £6,285, compared to just £2,079 if held in the average cash ISA.

The investment platform found even UK equity funds, despite two decades of market challenges, would have grown the original £1,000 to £3,787, comfortably beating cash returns and inflation over the same period.

Laura Suter, director of personal finance at AJ Bell, said the figures revealed the “hidden cost of playing it safe”.

“Inflation quietly eats away at savings, and even the average cash ISA will have struggled to keep pace. By contrast, investors who were willing to take on some risk have been handsomely rewarded,” Suter said.

If you’re looking to open a stocks and shares ISA, bear in mind you may have to pay certain fees which can impact any gains you make.

You may be charged a platform or account fee, charged as either a percentage of your investment amount or as a flat amount each month or year. You may also have to pay trading or dealing fees each time you buy or sell an investment.

Make sure you read our guides on how to start investing and the best investing apps.

Money market funds and other ‘cash-like’ investments could be subject to the incoming £12,000 cash ISA limit from 6 April 2027, limiting the ability of investors to manage their risk profiles.

Under new rules published by HMRC, ‘cash-like’ investments – which experts believe could include money market funds and similar investments like short-dated bonds – will be subject to tests to establish whether they are eligible to be held in a stocks and shares ISA or a cash ISA.

Beginner investors who are switching from exclusively cash savings towards investing by opening a stocks and shares ISA can currently use money market funds as a bridge between the two. They offer low-risk cash-like returns from within a stocks and shares ISA.

Money market funds have also been rising in popularity and were some of the top funds purchased by DIY investors in November.

But if speculation that money market funds or short-dated bonds would be considered cash-like, the reforms that HMRC is proposing could block new or cautious investors from using these products to manage their risk.

“Blocking money market funds within stocks and shares ISAs would be a serious setback for investors,” said Mark Burges Watson, co-founder of investing app Kaldi. “These funds are among the safest short-term investment options – low-risk, cash-like, and currently yielding over 4%, far higher than instant-access cash ISAs at high street banks.”

MoneyWeek asked HMRC for clarification over whether money market funds would be considered 'cash-like' under the new rules, and how the mechanism for enforcing the respective limits would work - a HMRC spokesperson said: "Rules will be introduced to avoid circumvention of the lower limit for cash ISAs, including tests to determine whether an investment is eligible to be held in a stocks and shares or innovative finance ISA, or is ‘cash like’.

"Whether an investment will qualify for inclusion within an ISA will depend on whether it complies with the rules. The detail of the changes to the rules will be publicised in advance of the change, and following discussions with stakeholders."

The new HMRC rules will also ban transfers from stocks and shares to cash ISAs, as well as implementing a charge on any interest paid on cash holdings within a stocks and shares or Innovative Finance ISA.

Why are investors using money market funds?

Under the current rules, money market funds can be held in a stocks and shares ISA. That means they would theoretically circumvent the upcoming reduction in the annual cash ISA limit to £12,000, which will affect people under the age of 65.

“With the cash ISA allowance cut to £12,000, millions of savers will be forced into taxable accounts for their excess savings,” said Burges Watson. “Money market funds serve as an ideal stepping stone, letting savers park money securely while deciding how to invest or managing short-term market volatility.”

If money market funds were to remain eligible for stocks and shares ISA inclusion (or would otherwise be exempt from the ‘cash-like investment’ restrictions) then savers could theoretically deposit £12,000 annually in a cash ISA and put the remaining £8,000 into money market funds in a stocks and shares ISA – utilising their entire £20,000 ISA allowance but keeping it in low-risk, cash-like investments.

Burges Watson added that restricting access to lower-risk products “undermines the very purpose of ISAs: supporting safe, flexible investment”.

Volatility within the market is a particular concern for many investors, with stretched stock market valuations prompting fears of an AI-driven bubble.

“Record high markets have… served to foster an appetite for lower risk investments such as money market funds and short duration bonds,” said Ryan Hughes, managing director at AJ Bell Investments.

Assets invested in the Money Market model portfolio service (MPS) on AJ Bell’s advised platform tripled in the 12 months to November. The MPS, which is only available to AJ Bell's advised clients, invests in cash, as well as cash alternatives including money market funds and ultra-short-dated bonds.

How would HMRC restrict access to money market funds?

It isn’t clear yet how a potential rule change would be implemented. HMRC's website says that the industry will be consulted on the draft legislation to amend ISA regulations, and that this legislation will appear before Parliament "well ahead" of the April 2027 rule change.

HMRC's statement in response to MoneyWeek's question about enforcement indicates that cash-like investments will likely be excluded from stocks and shares ISA eligibility.

But whatever happens, implementing the block could add further complexity to an ISA system which critics warn is already becoming confusing for beginner investors.

The nature of money market funds may also prohibit HMRC from changing their designation.

“HMRC could have a tough time enforcing these restrictions, as money market funds are classified as investments, carry a ‘Capital At Risk’ warning and are not covered by the FSCS,” said Burges Watson.

The long run-up to the Budget gave rise to fevered and increasingly alarmist speculation about its contents. This descended into chaos as frantic lobbying by interested parties, dire warnings by expert observers, and threats of rebellion by the government’s backbenchers led to U-turn after U-turn. Now, at last, the Budget has been delivered, and the speculation is over. What does it mean for the UK stock market?

The answer is very little. The FTSE 100 is very likely to continue climbing, while mid and small caps, which have underperformed in recent years, should recover lost ground. There is very little correlation between the performance of a country’s economy and its domestic stock market, which is why the Australian stock market has more than doubled in the last 10 years while China’s Shanghai index is up 10%.

About 75% of the FTSE 100’s revenues and about 50% of the FTSE 250’s sales stem from outside the UK. Many FTSE 100 companies, such as BAT, Shell and Rio Tinto, are based in Britain but do very little – if any – business here. Others, like Mondi, Airtel Africa and Coca-Cola HBC (formerly Coca-Cola Hellenic Bottling Company) use a London listing as a mere flag of convenience. Companies like Vodafone, National Grid and Compass have evolved from domestic into international businesses; and primarily domestic companies, such as EasyJet, M&S and Next, are increasing their overseas exposure.

Twenty years ago, the blue-chip index was dominated by mega-cap companies that had grown big through mergers in the late 1990s but were then stagnating in terms of business, earnings and share price. Now, those companies, much diminished in relative terms, are working hard to grow, improve profitability and reward shareholders. Even Glaxo and Vodafone have seen notable turnarounds recently, while Diageo reacted quickly to disappointing trading that had halved its share price.

UK-based companies are not expecting the government to do them any favours with regard to the economy, profitability or taxation; their attitude to investing and doing business in the UK is based on pragmatism. AstraZeneca has therefore responded to a withdrawal of government support by switching its attention to the US.

Global investors spot a bargain in UK stocks

UK-listed companies are attracting increasing attention from overseas investors, who are gradually eclipsing domestic ones. In the last couple of years, the chart of the FTSE 100 has accelerated upwards, while there have been “early signs of an earnings reacceleration”, says Chris Watling of Longview Economics.

The prime problem for the UK market has been the lack of participation by domestic investors, but this is likely to change. There have been heavy net outflows from equity funds, especially from UK funds (in 50 of the last 51 months). UK investors have shunned equities, deterred by risk warnings, economic gloom and regulatory hostility, and unaware that cash loses value over time in real terms. Over two-thirds of individual savings accounts (ISAs) are just in cash.

Yet the UK savings rate is over 10%, double the historic average. Interest rates and hence deposit rates are likely to fall further, and equity markets have been rising for three years. Savers will wake up to the reality that they are missing out and, in 2026, should start to discount a change to a more business- and investment-friendly government. Finally, the attention drawn to the FTSE 100 breaking through 10,000 should galvanise investors.

Admittedly, the tenfold appreciation since launch at the start of 1984 is not that impressive in annual terms. Adding back an average dividend yield of 3%, the annualised return has been 8.5% or 5.6% in real terms. The return until 2000 was much better than subsequently, but at its millennium peak of nearly 7,000, the FTSE 100 was severely overvalued and set to fall in half. Taking this into account by estimating a trend level of 4,500 still shows a marked slowdown in annual returns from 10% in real terms before 2000 to only 3.3% subsequently.

Arguably, the change of trend coincided with the deceleration of economic growth in 2008, but it is likely that an unsustainable boom in financial services disguised a more gradual slowdown in the preceding years. In any case, the claim that Britain’s economic problems date back to the Brexit vote in 2016 are a myth, just as was the claim in the 1960s and early 1970s that Britain’s pedestrian economic performance was attributable to being outside the EEC.

Ultimately, sustained outperformance by the UK stock market will require a strong, lower-tax economy to encourage the creation of growth businesses, their access to domestic capital and their listing in London. The market needs to go up because demand for equities exceeds and pulls up supply, not because markets are shrinking (through takeovers and buybacks) faster than investors are taking their money out.

As economist Arthur Laffer points out, “every time we have raised taxes on the rich, three things have happened: the economy underperformed, the share of tax revenues from the rich fell and the poor got hammered. When we cut taxes, the reverse happened.”

Even the prime minister has said that “the UK cannot tax its way to growth”, though his chancellor and most of his party appear to disagree. “If you want to help the poor, create growth,” says Laffer, who quotes John F. Kennedy: “The best form of welfare is a good, well-paid job.”

Better economic news for the UK may be a change of government away, but the good news for investors, whether in the UK or via UK-listed funds, is here already.

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The average value of the UK’s biggest stocks and shares ISA pots are worth 17 times more than their cash equivalents, new figures show, as the Treasury reportedly mulls ways to get ordinary Brits investing more.

All ISAs allow savers to put away up to £20,000 a year, in either cash or shares or both, to grow free of any income tax, dividend tax or capital gains tax. But there are stark differences between cash ISAs and stocks and shares ISAs in how much they grow.

Of the top 25 highest value cash ISAs, the average is worth £640,000, according to data from HMRC obtained in a Freedom of Information request by investment firm InvestEngine.

By contrast, the average value of the top 25 highest value stocks and shares ISAs is £10,980,000 – more than 17 times higher.

It means there is a more than £10 million difference between the average across the highest value cash and stocks and shares accounts.

Even when looking at smaller amounts, stocks and shares accounts have pulled ahead dramatically in the value stakes.

Only 30 cash ISAs have over £500,000 in them, compared to 38,680 stocks and shares ISAs, the figures showed.

While 1,530 cash ISAs have over £250,000 in them, for stocks and shares it’s 244,570.

Andrew Prosser, head of investments at InvestEngine said the numbers underline how investing is clearly the most effective way to grow your long-term wealth and to potentially become an ISA millionaire.

“While cash ISAs will always have an important role, especially for shorter-term financial needs, the figures set out clearly the value of long-term investing, with the highest-value stocks and shares ISAs now worth 17 times that of the top cash ISAs on average,” he said.

We compare cash ISAs vs stocks and shares ISAs in a separate article

Cash ISA reform

The gap between the potential returns on offer from stocks and share ISAs vs cash ISAs has also caught the attention of the Treasury, with chancellor Rachel Reeves trying to turn the British public from a nation of savers into investors.

Reeves reportedly has her sights on ISA reform as the way to do it – potentially with a cut to the cash ISA limit from to as low as £4,000 – with an announcement expected in the upcoming Budget on 26 November.

The chancellor told broadcasters in February: “It’s really important that we support people to save to achieve their aspirations. At the moment, there is a £20,000 limit on what you can put into either cash or equities (ISAs) but we want to get that balance right.

“I do want to create more of a culture in the UK of retail investing like what you have in the United States, to earn better returns for savers.”

There was around £360 billion saved in cash ISAs as of the 2023/24 tax year. Cash ISAs accounted for about 66% of all ISA subscriptions in that period. Only around 3.6 million people hold both investment and cash accounts. Just 4.2 million use ISAs solely to invest.

Cash ISA savers’ ‘won’t switch’

However cash ISA savers have shown a reluctance to want to switch from the safety of cash ISAs.

Research polling 1,400 cash ISA savers – four fifths of whom were aged 65 or over – by Paragon Bank found the majority would not invest in stocks and shares in light of a cut to cash limits. They would switch to regular savings accounts instead, potentially driving up their income tax bill.

MoneyWeek spoke to one reader who said, after losing £5,000 playing the stock market, cutting the cash limit on ISAs still wouldn’t make him invest.

But the government is hoping its Leeds Reforms can help tip the balance. Banks will soon start sending investment opportunities to savers with cash sitting in low-interest accounts for the first time. There will also be a nationwide advertising campaign to highlight the opportunities of investing for people who are able to do so.

Under current trends, moving £2,000 from these low-interest accounts to stocks and shares could make millions of people more than £9,000 better off in 20 years’ time, by the government's reckoning.

Saving vs investing

The numbers are on the chancellor’s side – if she can convince a sceptical British public.

As the Budget, and with it, potential ISA reform, approaches, the data obtained via the FOI reveals a clear and growing divide between saving and investing, Prosser said.

“The difference reflects how consistent investing has proven to be the most effective route to building meaningful, long-term wealth,” he added.

“As the chancellor looks set to adjust ISA rules to encourage more people to invest, it’s these kinds of numbers that truly help demonstrate the potential that investing holds.”

Alongside ISA reform, measures to improve financial education and increase its accessibility should also feature in the Budget,” Prosser said.

“This approach has far greater potential to drive participation in investing than simply placing restrictions on savings and ultimately foster a better investment culture in the UK.”

The number of ISA millionaires has soared to a record high of 5,070, according to official data.

A Freedom of Information (FOI) request by money app Plum reveals the number of ISA millionaires tracked by HMRC jumped almost 5% during the 2022/23 tax year from the 4,850 millionaires recorded on 5 April 2022.

The number of armchair investors sitting on seven-figure ISA pots has increased more than 1,000% in just seven years.

According to HMRC’s figures, the top 25 ISA investors are sitting on pots averaging an eye-watering £11,305,000 – up by £2.425 million (27%) in the space of just 12 months.

Meanwhile, the average ISA millionaire is sitting on a pot of £1,346,000, as at 5 April 2023.

Rajan Lakhani from Plum comments: “The ISA millionaire club just got bigger, with 220 new members joining its ranks, thanks in part to the US-driven AI-gold rush.

“Those at the top of the tree have – in some cases – seen their pots grow by more than £2 million in just 12 months, without a single penny of tax to pay on their gains.”

The figures come just days before chancellor Rachel Reeves’s Autumn Budget, which could contain changes to ISAs. There are rumours that the £20,000 cash ISA limit could be cut – although we won’t know for certain until the Budget is announced on 26 November.

However, it is stocks and shares ISAs, rather than cash ISAs, that have turned investors into ISA millionaires, or in some cases ISA multi-millionaires. Previous figures show that 94% of ISA millionaires reached this milestone by focusing solely on stocks and shares ISAs.

The rise of the ISA millionaire

ISA millionaire numbers have now increased by 1,026% since 2016 when they stood at just 450.

Since ISA millionaire figures were first tracked in 2016, there’s only been one dip recorded during that time, which was in 2020 when markets initially went into a major downturn at the beginning of the Covid pandemic.

Source: Plum. *Millionaire numbers counted by HMRC on 5 April each year

Of the 5,070 ISA millionaires recorded on 5 April 2023, 4,800 investors were sitting on pots valued at between £1 million and £1,999,999, while 200 individuals had pots between £2 million and £2,999,999.

Thirty had ISAs worth £3 million to £3,999,999, and 50 boasted ISA portfolios in excess of £4 million. (The figures are rounded to the nearest 10 in the FOI, and therefore do not add up to 5,070).

Lakhani notes that the flexibility of ISAs have made them “particularly attractive to younger investors, who don’t want to lock their money away until their late 50s, which is the case with pensions”.

In terms of the upcoming Autumn Budget, he adds: “Nobody is expecting changes to the tax-free status of ISAs themselves, or a change to the £20,000 allowance for stocks and shares ISAs.

“However, Reeves is reportedly considering lowering the annual allowance for cash ISAs specifically, a proposal which is dividing public opinion sharply.”

How to become an ISA millionaire

ISA millionaires usually use a stocks and shares ISA and invest their money, rather than keeping it in savings with a cash ISA.

They likely start early, invest consistently, and take some risk to reap greater returns.

Adrian Murphy, chief executive of the financial adviser Murphy Wealth, comments: “If you want to build wealth in a significant way, you have to build a risk-adjusted portfolio of stocks and shares.

“Historically, a balanced portfolio of stocks and shares has delivered far higher returns over most reasonable timeframes [than cash ISAs, which] often fail to beat inflation.”

According to Plum, someone starting from scratch today, maxing out the current £20,000 annual allowance each year into a stocks and shares ISA could expect to reach millionaires’ row in around 22 years, assuming annualised returns of 7% after fees.

Lakhani says the rise of the “Magnificent Seven” (Wall Street’s leading tech stocks including Nvidia) has helped balloon the pots of armchair investors in the UK in recent years.

We look in more detail at the shares, funds and investment trusts that ISA millionaires hold.

Stephen Charles, 74, doesn’t know exactly what he invested in 10 or so years ago. A retired secondary school English teacher from Forest Gate, east London, his speciality is Shakespeare not stocks. He went to a financial adviser with “quite a lot of money” seeking to make it grow – instead, over a number of years, he lost £5,000.

“We were told this portfolio was fairly safe. We were going for safe options,” Stephen recalled. “It was a shame we didn't just save that money in a cash ISA or regular savings account, it might have given us a higher return.”

Like 14.4 million Brits (according to analysis this year by investing platform AJ Bell) he’d only put money into cash ISAs, rather than a stocks and shares ISA, before his unsuccessful dabble in the stock market. Now a cash ISA from Coventry Building Society – which he says offers “really good customer service” – is the only place he puts spare money.

All ISAs allow money in them to grow via interest or investment returns entirely free of capital gains tax, dividend tax or income tax. Low risk, high control and very easy to use, cash ISAs are appealing to those who want to hold money in cash, rather than invest.

“After our losses, we're reluctant to get involved with stocks and shares again,” Stephen said. Behavioural finance terms it a bias towards safety. “If you need to withdraw money from a cash ISA, it is easy to do so at any time,” he added. “And of course it's easy to put money in.”

This last part may soon become less true. There’s currently an overall £20,000 ISA limit, but for months, it’s been rumoured chancellor Rachel Reeves wants to slash the cash ISA limit to potentially as low as £4,000 in the Autumn Budget on 26 November. Savers like Stephen could find they have fewer options to generate tax-free, risk-free returns.

Saving versus investing

With his wife, also a retired teacher, Stephen tucks away several hundred pounds a month in cash ISAs and has done so every year since Labour chancellor Gordon Brown introduced Individual Savings Accounts for cash and shares in April 1999 to replace PEPs and TESSAs.

Statistically, the couple could have made more investing. A one-off £1,000 when ISAs launched would now be worth £5,000 in the global funds sector, while £1,000 annually in the same could have grown to £92,000, number crunching by AJ Bell found.

The same one-off payment into a cash ISA in 1999 would be worth £2,079 today, while £1,000 annually in cash would have grown to £36,290.

Laura Suter, director of personal finance at AJ Bell, said: “These figures highlight the hidden cost of playing it safe. While keeping money in cash can feel comfortable, over time it’s an almost guaranteed way to lose purchasing power. Inflation quietly eats away at savings, and even the average cash ISA will have struggled to keep pace.”

Stephen understands higher returns are possible if you risk your money a bit. “I get that's true,” he said. “But our experience is you can also lose money. And that makes us wary.”

Figures suggest his reluctance is representative of most UK savers. HMRC data shows 22.3 million adults hold an ISA but two thirds (66%) of all ISA subscriptions in 2023/24 were into cash. Only around 3.6 million people hold both investment and cash accounts. Just 4.2 million use ISAs solely to invest.

Reeves’ plan to cut cash ISA limits

Some in financial services and, reportedly, the Treasury, see the popularity of cash ISAs as a problem. Current Labour chancellor Rachel Reeves seemingly wants the self-confessedly “risk averse” Charles’ and millions like them to switch to investment.

Reeves’ rumoured plan? Cut the cash amount savers can put into an ISA – potentially from £20,000 to £10,000 or even less – in a bid to get more people investing in British companies to boost their own nest eggs and UK economic growth. No thanks, said Stephen.

“We wouldn't do that. We wouldn't start saving into a stocks and shares ISA rather than the cash ISA. And if we reach the cash ISA limit, we'd probably look for other means of saving,” he said.

Savings interest on money held outside an ISA, however, is liable for tax after you reach your personal savings allowance – £1,000 a year for a basic rate taxpayer and £500 for a higher rate payer. Additional rate taxpayers have zero allowance.

Like many savers, the couple feel they don't know enough about investing. Their final salary Teachers’ Pensions scheme meant they retired at 60 having never needed to worry about how their retirement savings were invested, unlike those with modern defined contribution pension pots. “We're no experts,” Stephen said.

Leeds Reforms

The government has a plan for this too. Under the Leeds Reforms “working people will be equipped with the support they need to invest and grow their savings”, it was announced in July.

Banks will be tasked with sending investment opportunities to savers with cash sitting in low-interest accounts for the first time. Major financial institutions are backing an advertising campaign that will highlight the opportunities of investing for people who are able to do so.

Under current trends, moving £2,000 from these low-interest accounts to stocks and shares could make millions of people more than £9,000 better off in 20 years’ time, by the government's reckoning.

However a nationwide survey of 1,000 cash ISA holders by savings app Moneybox found 87% need a significant savings buffer to feel comfortable investing – with an average threshold of £27,617.

Almost nine out of 10 (88%) of those polled are calling on the government to protect the cash ISA tax-free savings allowance in the upcoming Budget. Just 9% said cutting it would prompt them to start investing more.

Cecilia Mourain, chief savings officer at Moneybox, said: “Millions of people rely on the cash ISA to build their financial future and any changes should be carefully considered.

“A strong cash foundation enables households to weather shocks and pursue long-term goals, from homeownership to retirement.”

Cash saving at risk

Critics say cash ISA money is essentially languishing virtually dormant and should be put to work in the investment markets.

Building societies – which use cash ISA holdings to lend out to mortgage borrowers – dispute this. They also argue the simplicity of the ISA is one of its greatest strengths – savers can put in up to £20,000 every year, switch between the stock market or cash, or have a mix of the two.

Jeremy Cox, head of strategy at Coventry Building Society, said: “Upsetting this balance by reducing the cash ISA allowance is going to make it far more complex in one fell swoop.

“In nudging people toward investing more, the chancellor needs to be careful she doesn't throw the baby out with the bathwater and discourage people from building up their cash savings too.”

Stephen agreed: “I guess I'm quite old fashioned, I inherited habits from my parents of saving rather than spending. But I think we're probably quite typical of a certain type of saver. And I'm just not sure it's particularly appealing for us to invest in stocks and shares.

“I think saving should be encouraged by the government, rather than going down the route of trying to take more risk with our money.”

Overcoming this quiet British resistance multiplied by millions of risk averse Stephens could develop into (another) Budget headache for the chancellor.

MoneyWeek has contacted the Treasury for comment.

Deciding whether to put your money into a cash ISA or a stocks and shares ISA can feel like a head-scratcher – but it doesn’t have to be.

The two serve very different purposes, and can work well alongside each other. The important thing is having a clear idea of what you want out of the savings in your cash ISA, and what you’re planning to do with the money you invest into a stocks and shares ISA.

In brief, cash ISAs make a good home for money that you can’t afford to lose. That could include an emergency savings pot, or cash you’re putting aside for a big purchase within the next few years.

But because it pays relatively low levels of interest, cash hasn’t historically been the best way to grow your wealth over the long term. For that reason, any money that you aren’t likely to need in an emergency or within a one to two year timeframe could be put into a stocks and shares ISA where, despite the risk of greater short-term volatility, it will hopefully increase in value more over the long term.

“When it comes to choosing between a cash ISA and a stocks and shares ISA, the key question is: are you saving for the short term or the long term?” said Laura Suter, director of personal finance at investing platform AJ Bell. “If you’re setting money aside for an emergency fund, typically three to six months’ worth of expenses, then a cash ISA is a solid option.”

This way, any money you need at short notice or in the case of emergency is protected and easily accessible.

But for long term goals such as retirement plans or home improvements, Suter believes a stocks and shares ISA is more effective than a cash ISA.

“Markets tend to rise over time and outperform cash, despite short-term fluctuations,” she said.

The advantages of cash ISAs

Above all else, cash ISAs offer you security and peace of mind that any money you contribute will at least hold its value in nominal terms.

Stock markets can be volatile, and your investments can fall in value, particularly over short term periods, so investments in the stock market could be worth less than the amount you initially invested, depending on when you withdraw the money

That means cash ISAs are a great place to store money that you think you might need within the short to medium term.

If you are planning a significant purchase within the next one to two years, or building an emergency pot, then a cash ISA might be a better option than a stocks and shares ISA.

It’s recommended people hold an easy to access emergency savings pot which covers three to six months of essential spending, before considering locking investments away longer-term.

The advantages of stocks and shares ISAs

Advocates of investing often highlight that in real terms, cash holdings tend to be eroded by inflation over time, despite a recent period when the best cash ISAs typically offered above-inflation rates – around 4.66% as of May 2026, for example. On the other hand, despite greater volatility over the short term, stock markets have historically tended to rise in value more than cash over the long term.

According to figures obtained by investment platform InvestEngine through a Freedom of Information (FOI) request to HMRC, an individual who had maxed out their cash ISA allowance every year since ISAs were launched in 1999, earning interest in line with the average interest rate banks lend money to each other, would have accumulated £418,176 by February 2026.

In contrast, someone who invested their full £20,000 annual allowance each year in a stocks and shares ISA – such as an exchange-traded fund (ETF) tracking global stock markets – would now be an ISA millionaire, with £1,357,964 in their account, more than three times higher than the equivalent in a cash ISA.

This divergence reinforces “how investing early and consistently in a diversified portfolio can make a meaningful difference to long-term, tax-free wealth as part of a broader financial plan”, according to InvestEngine’s head of investments Andrew Prosser.

In a bid to encourage Brits to take advantage of this long-term wealth-building potential of investments, the government announced a reduction in the cash ISA limit for under-65s. From the start of the 2027/28 tax year, these savers will be limited to putting £12,000 per year into cash ISAs, rather than the overall £20,000 annual ISA allowance.

It means under 65s will need to put £8,000 into a stocks and shares ISA in order to maximise their annual £20,000 allowance. Over 65s can continue using the full ISA allowance of £20,000 with cash ISAs, if they wish to.

HMRC also confirmed that certain ‘cash-like’ investments, potentially including money market funds, would be excluded from the stocks and shares ISAs allowance to prevent cautious savers circumventing the limit.

Do you need to choose between a cash ISA and a stocks and shares ISA?

Despite the new cash ISA limit, there is no need to “choose” between either a cash ISA or a stocks and shares ISA. The two are not mutually exclusive, and as above, it makes sense to put some of your money into one and some into the other.

The government is expected to make further changes to help people allocate their excess funds however works best for them.

From April 2026 a new ‘Targeted Support’ service will be available, which could equip more people to make the right financial decisions for themselves. “This includes understanding the benefits of moving excess cash into a stocks and shares ISA, potentially benefitting from much higher returns, albeit at the expense of the ‘no loss’ security of cash savings,” said Steven Cameron, pensions director at Aegon.

Cash appears to still be king among the UK’s savers with two-thirds of cash ISA savers saying they would not switch to a stocks and shares ISA even if the limit was reduced, according to new research.

Speculation has been swirling for months chancellor Rachel Reeves will cut the amount of cash savers can put away in an ISA from £20,000 to potentially £10,000 or even £5,000. Current cash ISA savings would be unaffected.

The headline driver behind a cut to the cash ISA limit, if it goes ahead in the Autumn Budget, is to get Britain investing more in British companies via stocks and shares held in an ISA, where gains on cash and investments grow tax-free.

But research polling 1,400 cash ISA savers – four fifths of whom were aged 65 or over – by Paragon Bank found the majority would not invest in stocks and shares in light of a cut to cash limits. They would switch to regular savings accounts instead, potentially driving up their income tax bill.

Almost two-thirds (62%) said they would not consider moving their money to a stocks and shares ISA if the cash ISA limit were reduced. Instead, 57% would opt for a regular savings account, potentially exposing themselves to tax on interest earned.

Other alternatives included Premium Bonds (16%), stocks and shares ISAs (18%), spending the money (16%), or gifting it to friends or family (13%).

Two-thirds (67%) said that the risk of losing money concerned them most about diverting savings into a stocks and shares ISA, followed by stock market volatility (65%). Fees and charges concerned 37%, with a fifth citing a lack of knowledge.

Andrew Wright, head of savings at Paragon Bank, said: “The vast majority of cash ISA savers are reluctant to expose their money to the risks associated with equities, despite the potential tax implications.

“Ultimately, it demonstrates that if the cash ISA threshold is reduced in the upcoming Budget, we’re likely to see an increase in savers paying more tax on their savings interest.”

Cash ISA tax grab?

Savers are also dubious about the motives behind the rumoured move. In March, when speculation first landed about cutting the cash ISA limit, asked about the potential reduction Reeves said she was seeking to “get the balance right between cash and equities to earn better returns for savers” and “boost the culture of retail investment” in Britain.

But nearly three-quarters (72%) of savers asked in the Paragon Bank survey believe any cut to the cash ISA would in fact be designed to increase tax revenue from savings. Just over half (54%) believe it is intended to increase investment into equities.

Basic rate income taxpayers can earn £1,000 a year in interest before being taxed, but this reduces to £500 for higher rate taxpayers and there is no personal savings allowance for additional rate taxpayers.

Many cash ISA savers, far from needing to be nudged into investing by government policies, have said they already typically invest in a balanced portfolio of investments in other asset classes, according to the survey.

While half also hold cash in Premium Bonds, 27% invest directly in company shares and a fifth (21%) invest via investment funds or trusts. Other investments included company or government bonds (7%), property (6%) and alternative investments, such as wine or art (2%).

The primary reason for choosing a cash ISA remains its tax-free interest, cited by 93% of respondents. When asked about their savings goals, just over half (51%) said they save for general purposes, over a third (38%) for financial security, a quarter (28%) for retirement, and just over one in 10 (15%) for emergencies.

The survey also suggested overwhelming support for maintaining or increasing the current £20,000 cash ISA annual allowance, with 57% of savers stating the limit is appropriate and a further 39% calling for it to be raised. Only 1% felt the threshold should be reduced.

Nearly two-thirds of those asked said they already saving between £15,000 and £20,000 annually – close to the current maximum cash ISA allowance.

Cash ISAs are the most widely used type of ISA. In the 2023/24 tax year, 66% of all ISA contributions were to cash ISAs, bringing total cash ISA holdings to £360 billion, according to government figures.

Chancellor Rachel Reeves is being urged to remove stamp duty from UK-listed shares held in an ISA to help direct more money into the London stock market.

She is reportedly looking at reforming the current ISA regime in an effort to build a culture of retail investing in the UK, similar to that in the US.

Measures reportedly being considered include cutting the cash ISA limit to £10,000 per year – there’s currently an overall £20,000 annual ISA allowance. It’s suggested this change would encourage savers to put more money into stocks and shares.

Reeves is also said to be looking at changing the stocks and shares ISA, potentially adding a minimum UK shareholding requirement that could effectively force investors to put a portion of their ISA holdings into UK stocks.

Scrapping stamp duty on UK shares has also been mooted, something the investment industry has long been lobbying for.

We look at what a proposal like this could look like, and what it could mean for you.

How much stamp duty do you currently pay on shares?

In both the cash and stocks and shares ISAs, you are shielded from paying income tax or capital gains tax from the money you earn from your savings or investments.

For cash savers this means you do not have to pay tax on savings interest, and for investors it means you do not have to pay tax on investment gains.

However, ISA investors must still pay stamp duty when buying shares. Currently, you must pay 0.5% in stamp duty when you buy a share, and it usually comes as part of the overall cost of the trade.

If the chancellor got rid of stamp duty on UK shares held in ISAs, it would reduce the overall cost of gaining exposure to the UK stock market and would theoretically make retail investors more likely to invest in the UK rather than the US or other global markets.

The cost of axing stamp duty on UK shares could be minimal compared to the benefit

Rumours that Reeves is considering removing stamp duty on UK shares were welcomed by many investment companies who believe the measure is a far better way to incentivise investment in Britain than implementing a minimum UK shareholding requirement.

Instead of a top-down mandate for ISA investors to put their money into UK shares, supporters believe removing stamp duty on British stocks provides a natural incentive for investors to choose them. It is the carrot rather than the stick.

Tom Selby, director of public policy at AJ Bell, told MoneyWeek that stamp duty “explicitly disincentivises investment in British companies at a time when government policy is aimed at doing precisely the opposite”.

Nine in ten investors said they would increase their holdings in UK equities if the stamp duty on shares was scrapped, a recent survey by investment platform Tradu found, indicating there is appetite among investors.

The issue of cost will be a major factor influencing the chancellor’s decision, especially considering the upcoming Budget is likely to increase taxes.

While the cost of axing stamp duty entirely would be in the billions, just removing the tax from UK shares held in an ISA would be minimal, perhaps as little as £120 million, according to AJ Bell.

“In government spending terms, that is pretty much a rounding error and would remove a nonsensical barrier to ISA investors buying shares in UK businesses,” added Selby.

The reform also comes at a time when London’s stock market is struggling to keep pace with other major exchanges, especially in America. Getting more people to invest in London-listed stocks could mean the UK stock market would increase its competitiveness.

Brendan Callan, CEO of Tradu, said: "If we’re serious about boosting investment in UK stocks, we need to abolish the share tax altogether. Doing so could see nine in ten retail investors increase their holdings in UK equities.

“If the government truly wants to prevent the UK economy from stagnating, it must take bold, decisive action to tackle both the behavioural and financial barriers to investing, not tinker around the edges.”

Not scrapping stamp duty on UK shares could also have larger economic impacts too, investment bank Peel Hunt has warned.

Charles Hall, head of research at Peel Hunt, said in a research note seen by MoneyWeek that stamp duty is harming the UK’s competitiveness in comparison to the US.

It came after reports indicated pharmaceutical firm AstraZeneca is considering a move to the New York Stock Exchange (NYSE).

If the firm moves to the NYSE, Peel Hunt believes its investors could save around £200 million a year in stamp duty payments. If this goes ahead and other large firms follow, the UK could lose £4.5 billion in tax revenue, according to the analysis.

Hall said: “There is a global battle for capital, talent and companies. We believe losing our companies to the US due to stamp duty would be a massive own goal.”

He called on the government to respond, saying: “The obvious answer in our view is to scrap stamp duty, as it would trigger a material improvement in UK equity valuations, drive higher CGT receipts, enhance activity in UK capital markets, and increase spending power.”

On the other hand, if the current regime stays in place, Hall warns that an increasing number of firms could start to leave the London stock market.

Retiring early is usually the preserve of the very wealthy or those who have invested and saved heavily.

But with rising living costs, stopping work sooner than your expected retirement age could be challenging for many workers.

The average retirement age in the UK is 65 years for men and 64 years for women. Yet having financial freedom earlier is on the minds of many, it would seem. Around one in six people (16%) hope to retire before they turn 60, according to research by Hargreaves Lansdown in April 2025.

MoneyWeek spoke to one reader who told how, at age 30, he plans to stop working before he is 50 and how he is doing it.

James Goodwin, who works for a small telecoms business in Leeds, is pumping up his ISA and investing more to get there.

“I’ve been investing in my ISA for five years already and I’m keen to reach a point where I have the choice not to work,” says James. “I might well carry on working when I get there, but it’s all about reaching that stage where you can choose.”

James, who lives in York with his wife Huiqiong, 33, says they both save as much as possible each month to put into their investments. In some years, he’s used his full £20,000 ISA allowance, but has reduced stocks and shares ISA contributions this year to build up a larger cash reserve.

Now they intend to invest around £10,000 to £20,000 per year.

“I spend a lot of spare time – even when I’m on holiday – researching our investments,” he says. “I would say I’m a value investor so I look for where a company’s share price is low compared to its intrinsic or true value.”

James is building his portfolio with UK stocks, including financial and hospitality companies.

He’s got his eye on a couple of investment trusts next. “The idea is to spend the next 15 years or so ploughing money into investments, and hope that they will yield enough to cover our living expenses to allow me to stop working. I realise there will be times when we can’t save as much, perhaps if children come along, but we will continue to save what we can.”

James, who writes an investment newsletter on his website firmreturns.com, pays into his company pension but has chosen to invest spare savings in an ISA held with AJ Bell so he’s not restricted on when he can use it to draw an income.

“When the time comes that I am financially comfortable enough to retire, I’d like to be a full-time investor – and maybe even seed my own fund, which wouldn’t feel like work,” he says.

Much of James’s success when it comes to retiring early will be selecting the right investments that will help him reach his goal.

Once he gets there, James dreams of a “fairly low-key” lifestyle – spending time reading, writing, hiking and socialising. “My wife would probably add some travelling to that list,” he adds.

The couple have had to make some sacrifices along the way. They could afford a larger house, but they chose a “smaller" one to keep housing expenses down, James says.

The couple also sold their car last year. Although it was convenient, they couldn’t justify the expense for the amount they drove.

Holidays abroad have also been put on hold – they only travel internationally to visit relatives, "where the largest cost is the flight tickets,” James says.

Cutting back on these higher expenses has meant the couple can continue to enjoy small luxuries in life – such as occasional meals out and trips to the cinema – without having to compromise on the amount they are saving.

If you want to start investing, we explain how to invest in our beginner’s guide.

How much do you need to retire early?

“The key to early retirement is building up enough money to ensure you have the lifestyle you want to enjoy,” says Alistair McQueen, head of savings and retirement at Aviva. “Though that number is different for everyone.

“You’ll also need to make sure that money will last. After all, even if you retire at 55 you could need to fund 30 years or more of retirement.”

Only half (48%) of mid-retirees aged 65-75 are confident they are on track to make their private pension savings last for life, recent research by Aviva and Age UK has found.

The latest Retirement Living Standards report from Pensions UK (previously the Pensions and Lifetime Savings Association or PLSA) estimates that a single person now needs £43,900 a year in post-tax spending – equating to more than £52,000 in gross income – to enjoy a “comfortable” retirement.

According to calculations by Fidelity, someone starting at age 25 would need to save £459 each month to reach that goal by 65.

Delaying contributions significantly increases the challenge: a 35-year-old would need to save £841 monthly, while a 45-year-old would need £1,703 a month – almost four times the commitment required at 25.

Ed Monk, associate director at Fidelity International, says: “Many people are taking positive steps towards improving their retirement prospects – whether that’s increasing contributions or planning to retire early. But intention alone isn’t enough. With the cost of retirement rising and expectations shifting, it’s vital that savers understand what kind of lifestyle their savings can realistically support.

“The PLSA’s updated benchmarks provide a useful reference point, and there are clear steps investors can take – whether they’re 10 years away from retirement or making final decisions – to ensure their savings align with the lifestyle they want in later life.”

If you do give up work, there’s always the option to change your mind and rejoin the workforce to start earning again.

“After the pandemic there was a surge of under 65s quitting their jobs, but many of these have returned to work as they realised that either they needed to go back to work financially, or for a strong daily sense of purpose,” says McQueen.

How to retire early

Here are some ideas on how to build wealth to increase your chances of financial freedom early.

Start investing early

The earlier you invest, the more time your money has a chance to grow.

You might not feel that retirement is a priority when you start the world of work, but your future self will thank you if you think long-term from the beginning.

Pay down your mortgage

Not having a mortgage to pay will be a big contributor as to whether you can afford to stop working. Repayments would be a large outgoing from your retirement savings.

You might consider using the 25% tax-free lump sum from your pension to pay off the remainder of your mortgage if that will cover it. But if you retire before you can access your pension then that won’t be an option for a while.

Max out pensions

Valuable tax breaks offered by pensions mean you can boost your retirement savings.

If you’re a basic rate taxpayer, every pound you pay in becomes £1.25, while for higher rate taxpayers it becomes £1.66.

The more money you can spare to pay in, the bigger your final pension pot will be. The earlier you invest, the more time your money has to grow. Find out from your employer if you can increase pension payments beyond the current level set and if they are matched by your employer, as this will boost your pension further.

While you can’t access money saved in a pension until 55 (rising to 57 in 2028) it’s still worth taking full advantage of the valuable pension tax relief. Remember, your fifties is still early retirement for most.

Build non-pension assets

While pensions are an extremely tax-efficient way of building wealth, they can’t be accessed until 55.

Should you want to stop work earlier, you would need non-pension assets, such as ISAs or buy-to-let property, to support your lifestyle until you can access your retirement pot and eventually your state pension.

The state pension age is currently 66 years old for both men and women but will start gradually increasing again from 6 May 2026.

Seek advice

If you need help with planning an early retirement you can speak to a financial adviser who can help map out a plan using cash flow modelling. This is a tool where you can understand if you have enough money to meet your retirement goals, testing different scenarios.

McQueen adds: “Retiring is one of the most important financial decisions you will make and not one to be rushed so getting help can allow you to consider all the variables at play including how long you might live, any social care you might need and any inheritance aspirations you have to leave money for loved ones when you’re gone.”

Find an adviser in your area at unbiased.com.

If you’re over 55, Pension Wise is a free and impartial government service that helps you understand the options for your pension pot.

Revolut customers will now be able to invest in exchange-traded-funds (ETFs) directly through the bank’s app as the fintech launches its first stocks and shares ISA.

The ISA will allow the bank’s 11 million UK customers to invest between £1 and £20,000 into the easy access tax-free wrapper.

As well as ETF options from Vanguard and BlackRock, users will also have access to other ETF providers via the Revolut app.

With diverse offerings, users can invest across various sectors and geographies with the convenience that comes with ETFs.

Yana Skrebenkova, CEO of wealth and trading UK at Revolut, said the introduction of the stocks and shares ISA was part of an effort by the bank to “break down the barriers” that stop Brits from investing.

She added that the ISA offering will “give our UK customers access to more low-cost investment tools alongside their day-to-day spending, without navigating multiple platforms.”

When will the Revolut ISA be available?

The Revolut stocks and shares ISA will be available within a matter of weeks – and those with an ISA elsewhere, can also transfer their ISA in.

If you are considering an ISA transfer, be sure to let your providers know and follow the correct procedure or you could lose the tax shield.

Revolut said launching its stocks and shares ISA was part of a wider drive to help normalise investing and help customers build long term wealth.

This rhetoric is similar to that of Rachel Reeves in recent months who has said she wants to build a "culture of investing” in Britain.

To achieve this, the chancellor is expected to announce a cut to the cash ISA limit at her Mansion House address on 15 July in an attempt to direct more money into the stock market via the stocks and shares ISA.

How does Revolut’s stocks and shares ISA compare?

By allowing customers to invest in stocks and shares from their banking app, Revolut will compete with fellow digital bank Monzo, which also launched an ETF offering earlier this year.

Monzo’s currently has 11 funds managed by BlackRock on offer, plus the option to ‘Build your own’ ETF.

While you can also have a stocks and shares ISA with a number of platforms, having one attached to your banking app could make it easier to start investing and manage your money.

Stocks and shares ISAs allow you to invest with any returns shielded from the taxman.

But, to make the most of your investments, it's important you pick one that is right for your needs.

Many savers remain cautious about investing and households are holding onto record amounts in cash, but more people are looking at investing for the first time.

Last month, the government also launched a new campaign, fronted by a savvy squirrel, to help first time investors.

The average stocks and shares ISA fund grew by 11.2% in the year to February 2026, while the average cash ISA rate returned 3.5% over the same period, according to data firm Moneyfacts.

If you are looking to open a stocks and share ISA, here’s everything you need to know to get started and pick the right one for you.

What is a stocks and shares ISA?

A stocks and shares ISA allows you to invest in shares, funds, investment trusts and bonds with no tax on any gains or income from assets held in the account.

Everyone over the age of 18 who is a UK resident for tax purposes can open a stocks and shares ISA and invest up to £20,000 each tax year (6 April to 5 April) in it. You can hold different types of ISAs, as long as you do not exceed the £20,000 allowance in total.

For example, if you’ve added £10,000 to a cash ISA in the 2026/27 tax year, you can only put up to £10,000 into a stocks and shares ISA.

Should you open a stocks and shares ISA?

If you’re considering opening a stocks and shares ISA, make sure you are doing it for the long term, as investment can take time to grow.

Alice Haine, personal finance analyst at Bestinvest, says: “A stocks and shares ISA is more appropriate for those with long-term financial goals, such as saving for a child’s education or supplementing retirement income.

“This is because when you are investing in the financial markets, you typically need a time horizon of at least five years to give your portfolio enough time to ride out any short-term volatility.”

How to find the best stocks and shares ISA

Once you’ve decided on your investment goal and time horizon, you can start looking at whether you want to do the investment picking for your stocks and shares ISA yourself or get a fund manager to do it for you.

DIY investing vs ready-made portfolios

DIY investing requires a more hands-on approach and you’ll need to spend some time researching and selecting assets that match your attitude to risk.

If you are starting out, most platforms have a list of funds that they suggest are good for beginners, so you can pick from that list if you want ideas.

Every month, MoneyWeek also looks at the top funds, stocks and trusts DIY investors are pumping their money into.

You'll be able to build your own portfolio, typically choosing from individual shares, funds, bonds, ETFs, and investment trusts.

AJ Bell, Hargreaves Lansdown, and Bestinvest are some examples of DIY investment platforms where you can build your own stocks and shares ISA.

Some platforms, typically robo-advisers, provide you with ready-made portfolios. You will be asked a few questions to determine your attitude to risk and then placed into a matched portfolio.

Unlike DIY investing, your choice is limited as you do not get to pick your investments. So, if you want specific funds or stocks, then pick an ISA with a platform that lets you decide on your investments. But, if you want to take a more hands-off approach, a robo-adviser may be for you.

Wealthify and Moneyfarm are examples of investment platforms offering a robo-advisor service.

Compare ISA providers

As well as knowing how you want to invest, it’s also important to look at fees.

We look at the fees and charges of some of the most popular DIY and managed stocks and shares ISAs platforms.

Figures correct as of 13 May 2026

The above figures are annual platform fees and there are other investment costs to consider. You can see what the costs are and what platform might be best for you by using this Boring Money tool.

What’s the minimum amount I can invest in a stocks and shares ISA?

Most stocks and shares ISAs have minimum deposit amounts to open them, but some are fairly low.

Bestinvest’s stocks and shares ISA has a minimum initial deposit of £50, for example. You can open a stocks and shares ISA with Hargreaves Lansdown from £100 or with a direct debit from £25 per month. Fidelity starts at £1,000.

You don’t have to deposit lump sums to invest in an ISA, and can instead make regular contributions either on an ad hoc basis or through regular deposits – such as on a monthly or quarterly basis.

A simple way to do this is to set up regular savings using a standing order. Someone wanting to maximise their ISA allowance in full could set up a monthly direct debit of £1,666, which adds up to just under £20,000 over the course of 12 months.

We look at lump sum vs regular investing in a separate piece.

Bestinvest’s Haine says: “By investing every month, investors benefit from pound‑cost averaging.

“Rather than committing a lump sum at a single price point — such as during a perceived dip — they buy smaller amounts at regular intervals, regardless of the market level at the time. This helps cushion the impact of volatility over the short to medium term.”

How can I withdraw from a stocks and shares ISA?

To withdraw from a stocks and shares ISA, you need to sell down your investments. This process usually takes three to seven days and is easy to do online via your investment platform or using your provider’s app.

But remember not all stocks and shares ISAs allow “flexible withdrawals”.

What are flexible withdrawals?

A flexible withdrawal means you can withdraw money from the ISA and then return that cash to the ISA without it impacting the current year’s £20,000 allowance.

“Flexible withdrawals'' can be returned within the same tax year and they can only go back into the same flexible ISA they were withdrawn from – not another ISA, even if that ISA is also flexible.

When an ISA isn’t flexible, any withdrawals you make won’t be added back to your annual allowance and you effectively lose that part of your allowance.

Do note, some investment platforms class ISA fees as withdrawals which can chip away at your annual allowance.

However, some will also let you replenish a flexible ISA by the amount of fees they have deducted throughout the tax year.

For someone with a £500k ISA paying 1% in annual fees, that could mean adding back £5,000 at the end of the tax year – effectively restoring a quarter of the annual ISA allowance.

Are stocks and shares ISAs worth it?

Stocks and shares ISAs provide a number of benefits that make them worth considering for investors, or savers who want to become investors.

They can offer a route to generate more than a cash ISA, although capital is at risk with investing.

There are also tax benefits. Filing a self-assessment tax return can be a cumbersome process, particularly if you need to add in investment income or capital gains – which can be quite laborious to calculate.

With income or gains on investments held within an ISA totally tax-free, there’s no need to declare it on a return, making the process that little bit simpler.

Do you think you may have a ‘lost’ pension pot somewhere from years ago? You’re not alone. Calls to the government’s Pension Tracing Service have risen 58% over the last year, as more Brits try to track down their lost money.

The number of calls to the Pension Tracing Service from savers looking to find old or ‘lost’ pensions jumped to 68,709 in the 12 months to 30 September 2025, up from 43,614 in the same period the year before, according to a Freedom of Information request by accountancy and wealth management business Lubbock Fine.

Andrew Tricker, director of Lubbock Fine Wealth Management, said the increase indicates more people are looking to trace their pensions in order to maximise their retirement savings, in the face of higher living costs. More than 993,000 people have used the government’s free Pensions Tracing Service since May 2024, via a mixture of online searches and telephone calls.

“People are increasingly taking the initiative to trace their pension pots, as evidenced by the sharp rise in calls to the Pension Tracing Service over the past year,” Tricker said.

"For someone who has had multiple jobs over the last decade the potential to lose pensions worth tens of thousands of pounds increases. Pension tracing and consolidation offers significant benefits, such as lower fees, simpler management and more efficient investment,” he added.

Millions of pension savers potentially missing out

Millions of pension savers are at risk of missing out on crucial retirement income by not tracking down lost pensions worth thousands of pounds, according to research.

Less than a third (30%) of UK adults have kept track of all their pension pots from previous jobs, a 2025 survey by Standard Life showed.

Meanwhile, three in five (60%) have never consolidated their pension savings, while two thirds (66%) have not tried to track down lost pots – despite the average pot being worth £9,470.

A quarter (24%) are unaware that changing employers can land you with multiple pension pots while one in four UK adults (26%) don’t know who their current pension provider is.

Mike Ambery, retirement and savings director at Standard Life, part of Phoenix Group, said: “Millions of people risk losing out on valuable retirement savings simply because they’ve lost track of their pensions.

“With multiple job moves now the norm, it’s easy for pots to slip through the cracks.

“While tracking pots down may seem like a hard task, there are simple steps you can take to get your pots in order.

“Even if consolidation isn’t the right option for everyone, simply knowing where your pensions are and keeping a record can make a real difference.”

In this guide, we explain how to find lost pensions, as well as savings and investments.

Do I have a lost pension?

Considering the average person has 11 jobs in their lifetime, it’s little wonder we lose track of individual pots, particularly if the time spent working for the firm was fleeting.

Lisa Picardo, chief business officer UK at PensionBee, said: “It is unsurprisingly quite common to lose track of a pension, and our own research shows that nearly one in five UK adults believe they have lost a pension pot, equating to around 8.8 million people.

“If you are enrolled into a pension scheme at work and then leave that job, your pension does not move with you. A new pot is created at your next employer, and unless you take steps to consolidate or keep records, it is easy to forget where your savings are held.”

People also lose track of pensions because their provider changes its name, moves its communications online or sends letters to an old address.

Thousands of people are trying to track down old pensions. The government’s Pension Tracing Service received 273,709 calls between 1 January 2021 and 29 September 2025, according to a Freedom of Information request by wealth firm Hargreaves Lansdown.

The number would be even higher except for the fact the Pension Tracing Service was merged with another Department for Work and Pensions helpline between 25 May and 27 October 2024.

Research from the Pensions Policy Institute estimates there are 3.3 million lost pension pots. “This is all money that can make a significant improvement to people’s lifestyles in retirement and could be the difference between struggling to make ends meet and being able to enjoy your golden years,” said Helen Morrissey, retirement expert at Hargreaves Lansdown.

Since the advent of auto-enrolment which was rolled out between 2012 and 2018, anyone aged 22 and over earning £10,000 or more will be automatically added to the company pension scheme when joining the company.

This makes it easier to forget you’ve been building up retirement savings.

The good news is that your money remains invested and can continue to grow, depending on stock market conditions, even after you leave a company.

How do I find lost pensions?

You can track down your old pensions by contacting past employers to find out who the pension provider is and then calling or emailing the provider directly to enquire after your retirement savings.

You will usually need your National Insurance number and details of when you worked there to help them track you down.

Or, you can use the government’s free Pension Tracing Service.

For this you’ll need to input details of the employer who set up the pension. You’ll then be given the name, address and telephone number of the provider who operates their scheme so you can get in touch directly.

Alternatively, you can use a free tracing service such as Gretel which has around 3,500 companies spanning the pensions, investments and savings sectors. If your provider is one of those registered, by entering your name, address and date of birth you can find out in minutes if you have a lost pension and where it is.

Morrissey said: “Make a list of everywhere you have worked and check to see if you have pension paperwork for them. If you don’t, and you suspect you had a pension with them, then give the Pension Tracing Helpline a call.”

Once you’ve tracked down your pensions, you may wish to consolidate them into one place. This can save you time, admin and even cost.

Morrissey said: “It’s important to compare your old provider with what your new one can offer you. What are the fees like? What kind of investment choice is on offer and what support is available to you?

“But having one overarching view of what you have can transform your retirement planning as you will view one larger pension in a different way to several small ones which you may be tempted to cash in and spend.”

However, before you take the plunge, it’s really important to check that you won’t be incurring expensive exit fees by transferring out.

Another thing to be careful of is the potential to miss out on important benefits such as guaranteed annuity rates, which could be lost if the pension is transferred. It also rarely makes sense to transfer out of a final salary pension.

How to avoid forgetting about lost pensions

Here are some steps you can take to avoid pensions getting lost in the ether.

- Check your personal details such as home address and phone number are up to date across all your pension plans. This helps your existing and previous providers relay any important information to you.

- Ensure all your providers have your current email address so they can contact you if you leave a job.

It can also be worth consolidating your plans into one so you have less admin to handle, but this isn’t for everyone.

For example, you might want to keep hold of benefits that come with a pension such as life insurance or a dependant’s pension.

It is generally not worth transferring a final salary pension either, as you would be losing a guaranteed income.

Ambery, from Standard Life, said: “Bringing plans together won’t be right for everyone, so check that you won’t be missing out on any benefits or guarantees by doing so.

“If you’re unsure about your options, you may want to seek advice from a financial adviser. You can find an adviser in your local area at Unbiased.

“You can also access free impartial guidance from MoneyHelper.”

How to find lost ISAs and savings accounts

If you took out your ISA through a wealth platform such as Hargreaves Lansdown, AJ Bell or Charles Stanley, they should be your first point of contact. They can update your contact details and reunite you with your savings.

Trade body the Investment Association also offers a free service via its Unclaimed Assets portal to track down stock-market related investments such as stocks and shares ISAs, investment funds or Exchange Traded Funds (ETFs).

Looking for cash savings accounts, opened through a bank, building society or NS&I?

You can use the My lost account service to search for accounts that have been marked as lost or dormant by your provider.

Set aside some time to complete the registration process.

Firstly, you need a valid email address. Then, to maximise your chance of finding an old savings account you’ll need to input as many of your previous addresses as you can remember and which institution the account was held with.

You’ll also be asked for sort codes, account numbers but it is not essential to provide these. Your request is then sent off to the bank or building society which contacts you directly once they’ve completed a search.

If your bank hasn’t marked the account as lost or dormant, however, you might not be successful.

Child Trust Funds are another type of savings account that commonly ends up lost. Child Trust Funds were set up for children born between 1 September 2002 and 1 March 2011.

More than a quarter of the accounts were opened by the government on behalf of parents.

According to HMRC, the value of unclaimed accounts for children who’ve now turned 18 but have never accessed their money is £1.4 billion.

Charlene Young, senior pensions and savings expert at wealth platform AJ Bell, said: “With over a quarter of these accounts set up by the government because parents failed to do so within the 12-month window it’s no surprise how much money sits unclaimed. Parents and children weren’t aware or won’t remember that an account was even set up, let alone where the money is now.”

You can search for a lost Child Trust Fund on the government’s website using your national insurance number and date of birth.

We explore lost Child Trust Funds in more detail in a separate piece.

How to find lost shares

If you’ve bought shares directly with a company, rather than going through a wealth platform, you’ll need to contact one of three share registrars – MUFG, Computer Share or Equiniti – to start your search.

If you don’t know which registrar is in charge of your shares, you’ll have to make enquiries with all three. You’ll need to tell them which company you think you have shares with as they can only carry out a search based on what you have told them.

Be ready to pay some fees here, however, depending on what changes they need to make to your records or if you can’t find your share certificate and need a new one.

Duncan Stevens, chief executive of free-account tracing service Gretel, said: “If you don’t have a share certificate you’ll need to sign an indemnity form and you may be charged an additional fee for an insurance indemnity.

“It’s an insurance policy that protects the organisation from fraud in the event that somebody finds that certificate and tries to make a claim against those shares for that money.”

You could also be charged for changing your address and asking for a dividend cheque to be reissued because it was posted to an old address. Fees can run from the tens of pounds into hundreds of pounds depending on the work that needs to be done.

How to find lost Premium Bonds

To find lost Premium Bonds, NS&I has its own tracing tool on its website. It will be able to find your bonds even if you have lost your bond document or you can’t find your holder’s number.

You can log into your NS&I account online to find your holder number which contains details of all your bonds. If you can’t remember your NS&I online account number, you can receive it by email after passing a security check.

Savers can also write to NS&I to locate lost bonds.

Unless you have cashed them in, your Premium Bonds will have continued to be entered into the monthly prize draw so don’t forget to check its prize checker tool to see if you’re owed any cash. There are millions of unclaimed Premium Bonds prizes out there, so it could be worth checking.

We explain how Premium Bonds work and how Premium Bonds prize winners are notified in separate articles.

Do you have a money story you'd like to share? Get in touch by emailing editor@moneyweek.com.

Hargreaves Lansdown has slashed its platform fee for early-bird investors opening a new stocks and shares ISA or self-invested personal pension (SIPP).

The annual charge will drop by 40%, from a maximum of 0.45% to 0.27%, for customers contributing or transferring in at least £10,000.

The special deal is available to those opening and funding an account between 15 April and 30 June 2025.

In addition, the UK’s biggest investment platform has launched another offer, whereby customers setting up a new direct debit in a stocks and shares ISA or SIPP by 30 June 2025 will get their account fee back as cash.

Paul Dimambro, director of pensions, investments and ISAs at Hargreaves Lansdown, comments: “After a whirlwind couple of weeks with significant market shifts [thanks to president Trump’s tariffs] investors would be forgiven for forgetting a new tax year has started.

“That’s why we’ve launched two new offers, aimed at giving people an extra incentive to take the first steps towards their financial freedom.”

The special offers come at a time when other investment platforms are running pension and ISA transfer offers worth up to £5,000 in cashback to try and entice new customers.

But, the cheaper fee also comes as competitor Vanguard has hiked its charges with the introduction of a £4 monthly fee at the end of February.

We look in more detail at how the special offers work, and whether a 0.27% account fee makes Hargreaves Lansdown competitive.

How do the special deals work?

Investors opening a new Hargreaves Lansdown stocks and shares ISA or SIPP with £10,000 or more will benefit from a 40% discount off the platform fee for six months.

This means a 0.27% charge will be in place from 1 July 2025 to 31 December 2025 (capped at £2.25 a month for the ISA, or £10 a month for the SIPP). It will then revert back to 0.45% (capped at £3.75 for the ISA, and £16.67 for the SIPP).

However, customers that only invest in funds may pay an even cheaper fee. Fund investors with accounts worth less than £250,000 who meet the special offer criteria will pay the reduced fee of 0.27%, but those with larger portfolios will pay less.

Investors with accounts valued at between £250,000 to £999,999 will pay 0.15% (down from 0.25%). Those with between £1,000,000 and £1,999,999 will be charged 0.06% (down from 0.1%). Meanwhile, investors with more than £2 million in a fund account will continue to pay nothing.

Opening and contributing to the account must happen between 15 April and 30 June 2025, to get the cheaper deal.

The second offer is for early-bird regular savers setting up a new direct debit instruction between 15 April and 26 June 2025.

They will get their account charges of 0.45% returned to them as cashback. This will be paid into their Loyalty Bonus Accounts on 26 July 2026, on satisfying certain conditions.

These include that the direct debit must be at least £25 per month, and must be kept in place, for the same value or higher, for no less than 12 months.

How does Hargreaves Lansdown’s lower fee compare to its competitors?

A 40% discount sounds like a great deal, but Hargreaves Lansdown is known to be one of the more expensive platforms, so how does the lower charge shape up versus its rivals?

We asked the lang cat, a financial consultancy, to crunch the figures to see which platforms work out cheapest.

It says that for someone with a small £15,000 ISA portfolio invested in funds, Hargreaves Lansdown’s annual fee will drop from £68 to £54, thanks to the reduced charge for six of the 12 months.

A £54 platform fee makes it one of the cheapest platforms, according to lang cat’s analysis of 13 platforms.

Halifax Share Dealing is the cheapest, at £36. But HL comes in lower than Fidelity, Interactive Investor, Bestinvest and Charles Stanley Direct.

What about bigger portfolios? For an ISA worth £100,000, Hargreaves’s fee falls from £450 to £360, meaning it is no longer the most expensive for portfolios this size. Again, these HL charges reflect the reduced fee for six months.

It is now more comparable to some of its competitors, such as Bestinvest (£400) and Fidelity (£350).

However, Vanguard and Interactive Investor are much cheaper, at £150 and £144 respectively.

For an ISA investing purely in investment companies (rather than funds), HL’s fee is just £36 a year, regardless of the size of portfolio, because a monthly cap kicks in.

So, HL’s special offer makes the platform joint cheapest with Halifax Share Dealing out of the 13 analysed. In contrast, Vanguard charges £48 a year for an ISA worth £25,000 or £50,000; the cost rises as the portfolio gets bigger. AJ Bell’s fee is £38 or £42 depending on the amount invested.

At the other end of the scale, Bestinvest, Willis Owen and Close Brothers charge anywhere from £38 to more than £1,000 for the biggest portfolios.

Chris Bredin, a consultant at the lang cat, tells MoneyWeek: “While any reduction in price is welcomed to lower the cost of investing, it’s important to consider what the cost becomes after the offer period expires.

“An investment of £50k with Hargreaves Lansdown in funds, within an ISA is charged at 0.27% for the offer period – this increases to the regular rate of 0.45% when this expires.”

In terms of SIPPs, the analysis shows a similar picture. Someone opening a SIPP, contributing £100,000 and investing purely in funds will face an annual charge of £360 (down from the usual £450). This is cheaper than Barclays and Bestinvest (both £400), but more than Vanguard (£150) and Interactive Investor (£156).

A £100,000 SIPP investing only in investment companies would pay £160 a year (compared to the full cost of £200), making it the seventh cheapest of 13 platforms.

Bredin adds: “Investors need to take other factors into account when looking at how platforms compare on cost. The type of asset being invested in, how often you’re likely to trade, which wrappers you use are all examples that can affect pricing – alongside sums invested.

“Fees are only one part of the picture, of course. Things like how much help you need picking investments, your impression and trust levels of a brand are some of the many other factors that will drive what is a personal choice based on your own set of circumstances.”

ISAs (individual savings accounts) turn 26 this month after the then-chancellor Gordon Brown launched them back in April 1999.

The arrival of the tax-free accounts included cash ISAs and stocks and shares ISAs, plus a £7,000 allowance.

Over the past few decades, the ISA family has been widened to include junior ISAs, lifetime ISAs and innovative finance ISAs. The annual ISA allowance has also been bumped up to £20,000.

ISAs have become a valuable cornerstone for millions of savers and investors, both young and old.

The latest HMRC data reveals that £71.6 billion was paid into 12.4 million adult ISAs during the 2022-2023 tax year. Meanwhile, £1.5 billion was subscribed to junior ISAs, which are available for those aged under 18.

Stocks and shares ISA holdings account for about 60% of the market value of adult ISAs.

Thousands of people have become ISA millionaires through making the most of the tax-free allowance and a smart investment strategy.

Stocks and shares ISAs tend to outperform cash ISAs over the long term.

According to Hargreaves Lansdown, if you invested £1,000 into a cash ISA in April 1999 when ISAs first launched, it would be worth £1,949 based on a typical interest rate (as at April 2025). If you invested £1,000 in a global tracker fund within a stocks and shares ISA, it would be worth £5,110.

With this in mind, we reveal the best-performing funds and investment trusts over the past 26 years.

Best-performing funds and investment trusts since stocks and shares ISAs were launched

We asked Hargreaves Lansdown for the top-performing funds and investment trusts since April 1999, and to show how much an ISA customer could be sitting on if they had invested £1,000 back then.

Source: Hargreaves Lansdown. Returns are from 06/04/1999 to 06/04/2025

The figures show that the biggest returns came from investment trusts. Someone who had invested £1,000 in the Scottish Oriental Smaller Companies Trust back in 1999 would now be sitting on more than £40,000.

The second-best return came from abrdn Asia Focus.

Victoria Hasler, head of fund analysis at Hargreaves Lansdown, tells MoneyWeek: “The top two investment trusts on the list invest in Asia. This is a dynamic area of the market and one in which things have evolved a lot over the last 26 years.

“The two giants of the region, India and China, may differ in character but both have implemented reforms in their stock markets over the last 26 years, making them much more open to foreign investors.”

She adds: “The other three trusts making it into the top five are focused on private equity investments. Private equity markets tend to see higher returns over very long periods of time in compensation for the higher risk that investors generally assume in them.”

In the open-ended fund space, abrdn SICAV I - Indian Equity boasts the best performance over 26 years, with a 2,342% return. IFSL Marlborough Special Situations takes the second spot.

Hasler comments: “Of the open-ended funds on the list, two are focused on India. Again, these would have benefited from the structural reforms implemented in the Indian stock markets.

“A further two of the funds are focused on UK smaller companies. Smaller companies in general, and particularly in a relatively small market such as the UK, are higher risk investments.”

Anyone who had invested in these funds and trusts with an ISA back in 1999 would have been very lucky to have got such sparkling results – and would have had to deal with a fair amount of volatility along the way. Investing in sectors like smaller companies and private equity, and regions like India and the rest of Asia, can be risky.

Hargreaves Lansdown advises that the figures don’t show realistic returns for the average investor, and that you shouldn’t lose sleep over the growth they've missed.

"Instead, it’s worth looking to the future, and taking advantage of ISAs now. The right assets and approaches will depend on your circumstances and objectives, but these figures show that if you’re putting money away for the long term, it’s well worth considering a stocks and shares ISA.”

Many families start saving for their child’s future from the moment they are born. A junior ISA can be a good vehicle for this. You can stash up to £9,000 per year in the tax-free account, either putting it in cash or stocks and shares.

The latest HMRC data shows 1.2 million junior ISAs were opened in 2022/23. The majority (61%) of subscriptions were for junior cash ISAs, while 39% opened a stocks and shares junior ISA.

Coupled with analysis that shows stocks and shares generally outperform cash over the long term, provided they are suitably diversified, this suggests families could be losing out on potential returns by playing it safe.

If you put £9,000 in a junior cash ISA 18 years ago, it would be worth just £7,453 today when adjusted for inflation, according to analysis from the Investment Association (IA).

The same amount would have grown to £20,802 in real terms, if invested in a typical global equity fund via a junior stocks and shares ISA, the IA said. They used the IA global sector average to arrive at this calculation.

The difference is a whopping £13,349 over an 18-year time horizon. It suggests if cash was ever king, its crown slipped long ago.

“Many parents are already taking advantage of junior ISAs, but we would like to see more benefit from long-term investment through the junior stocks and shares ISA,” said Chris Cummings, IA chief executive.

The Investment Association is calling on the government to introduce more effective financial education so that concepts like compound growth and inflation risk are better understood.

What is a junior ISA?

A junior ISA is a tax-efficient wrapper for saving and investing on behalf of a child. You can deposit up to £9,000 each tax year, holding it in cash or investing it in the stock market. Any income and capital gains are shielded from the taxman.

A junior ISA legally belongs to the child, so it won’t eat into your £20,000 ISA allowance each tax year (the limit for adults). The child is free to access the funds as soon as they turn 18.

It is important to instil good financial habits from an early age so the child uses the money responsibly once they are able to access it – for example, using it to help with university costs or as a deposit on a first home.

Leaving the money invested to grow further is often one of the best options, depending on your immediate circumstances.

Of course, junior ISAs aren’t the right option for everyone. For example, families that don’t have enough leftover cash at the end of each month to top up their emergency fund or their own ISA should consider that first.

However, they can be a great way to set your child up for the future, and can help you safeguard more money from the taxman.

Junior ISA: stocks and shares versus cash

Cash is essential for short-term savings goals and emergencies, but investing sensibly in a diversified pot of investments is often considered the best way to build long-term wealth. We look at the pros and cons of both options in our “saving versus investing” guide.

Investment markets are more volatile in the short term, but taking a long-term view can help you smooth out the bumps and hopefully beat inflation by a meaningful margin. A minimum of around five years is typically recommended.

A stocks and shares account may be well suited to a baby or child, as they have an 18-year time horizon ahead of them before they can even think about touching the account.

The S&P 500 might have taken a beating in recent days in response to US president Donald Trump’s tariffs, but it is still up more than 250% over the past 18 years. The FTSE All World, a global stock market index, is up around 100% over the same period. Of course, past performance is not indicative of future returns, but the figures provide food for thought.

The power of investment markets is further illustrated by looking at how junior ISA wealth is booming.

Wealth management firm Brewin Dolphin put in a Freedom of Information request to HMRC last year, and found that 370 of the top junior ISA investors had pots worth more than £200,000 in the 2021/22 tax year.

Fifty children had over half a million in their junior ISA, with the average pot in this bracket coming to £761,100.

These figures would have been impossible to achieve through a cash ISA alone, even if parents paid in the maximum amount every year.

Brewin Dolphin calculated that, even if you had maxed out the annual allowance every year for 17 years, you would still have had to achieve an annual return of nearly 32% to build a pot worth £761,100.

It is worth pointing out that the junior ISA allowance has changed over time, rising from £3,600 when they were first launched in 2011 to £9,000 today.

Cash ISA reforms are in the government’s sights as it looks for ways to reinvigorate the UK’s private markets. New research suggests, though, that people might be moving away from cash ISAs of their own accord.

Different kinds of ISA can be used for different purposes. Cash ISAs and stocks and shares ISAs are two of the most popular. A cash ISA is effectively a savings account that offers tax-free interest, while a stocks and shares ISA allows you to invest in funds, stocks and trusts.

While no direct mention of cash ISAs was made in chancellor Rachel Reeves’ Spring Statement last week, documentation following the event confirmed that ISA reform is under consideration and that the cash ISA threat remains.

“Despite holding off on reform today, the government has confirmed change to the status quo is being considered ahead of the Budget later this year,” said Michael Summersgill, CEO of AJ Bell, following the chancellor’s statement, “with Labour having already committed to ISA simplification and encouraging greater use of stocks and shares ISAs during the general election campaign.”

The speculation is that the government will reduce the annual ISA limit specifically for cash ISAs, perhaps to as low as £4,000 per year, in order to encourage more people to invest in the stock market via a stocks and shares ISA.

“The government wants to get more people into investing, helping them increase their wealth while supporting wider economic growth.” says Andrew Prosser, head of investments at investment platform InvestEngine.

Cash ISA growth is falling: stocks and shares are on the rise

Government intervention might not be needed, though. New research from InvestEngine has found that new cash ISA openings are declining while stocks and shares ISAs are on the up, and that the amount invested in the latter is substantially higher than the amount held in cash ISAs.

New stocks and shares ISA openings have increased 57% in the five years from 2018/19 to 2022/23, the most recent year for which data is available, according to InvestEngine’s analysis of HMRC data.

Conversely, new cash ISA openings fell by 7% during that period.

More funds are held in stocks and shares ISAs compared to their cash counterparts. The amount of funds held in stocks and shares ISAs increased 37% over this five year period to £431 billion, while cash ISA holdings have increased just 9% to £294 billion – meaning stocks and shares ISAs hold 46% more than cash ISAs.

^{Source: HMRC Annual savings statistics 2024 via InvestEngine}

“Although reforms have been delayed, our analysis shows stocks and shares ISAs are in fact increasing in popularity without the explicit need to make cash ISAs less appealing,” says Prosser.

Cash ISAs vs stocks and shares: which is better?

The debate over cash ISAs versus stocks and shares ISAs has been going on for some time, and with the end of the tax year approaching fast, savers and investors will be wondering where best to put their money.

In truth, it’s not an either/or situation. Both types of ISA offer particular benefits, and have a role to play in building long-term wealth and financial security.

Cash ISAs offer relatively easy access to your money whenever you need it. As such, they’re a good place to save for essential spending. How much you should have in savings varies depending on your particular circumstances, but as a rule of thumb many experts recommend having enough saved to cover three to six months’ essential spending.

It’s worth considering allocating any further cash above this to a stocks and shares ISA, though. Funds held in a cash ISA tend to perform poorly compared to the stock market over time, and can often fail to keep up with inflation.

“Past performance shows investment beats interest in the long-term,” says Prosser. “The government should use this period to improve public understanding of how investing, especially through diversified, simple and low-cost products like ETFs, could help more people to achieve their financial goals.”

While you don’t want your emergency savings to be invested in stocks and shares (in case you need them while the stock market is enduring a downturn), this is often the best way to build your longer term wealth.

Given high levels of current inflation, which many rates on offer from retail banks fail to match, "it makes sense for long term investors to favour investing over saving, even if it’s in simple index trackers”, says Dzmitry Lipski, head of funds research at Interactive Investor.

“As we move into a more uncertain market environment, it makes sense for cautious investors – or someone approaching retirement – to focus on capital preservation and limit volatility by maintaining a reasonable cash buffer within a well-diversified portfolio.”

In terms of InvestEngine’s research, the period in question was a notably poor time to invest in cash given it coincided with historically low interest rates and a boom period for the stock market.

That said, the stock market downturn at the end of the period might have prompted a bigger turnaround in momentum than was in fact the case.

“Despite historically low interest rates during the pandemic having come to an end, the number of cash accounts being opened hasn’t bounced back,” says Prosser.

ISA investment fees are coming into focus as the tax year ends.

Many investors will choose the best investment platform for their stocks and shares ISA based on asset choice, research tools, functionality and even ISA transfer offers, but charges are also important.

The cost of investing is becoming a bigger factor when choosing the best stocks and shares ISA as many active managers are failing to outperform the markets, causing a flight to passive funds.

Investors are also increasingly favouring exchange traded funds, letting them track currently rising markets such as the S&P 500, which has been boosted by the success of the Magnificent 7.

Share trading can be more expensive on larger and more popular investment platforms, creating an issue for ISA investors relying on the bigger players for their portfolio.

Analysis by new ISA market entrant Lightyear claims stocks and shares ISA holders are paying more than £800 million extra in “unnecessary account fees," when only holding stocks and ETFs, which can eat into their returns.

Stocks and shares ISA costs

The traditional charging model among investment platforms is an annual percentage fee based on the value of your portfolio or flat fees.

But a new cohort of app-based investment platforms such as Lightyear, Freetrade and Trading212 let users build an ISA portfolio on their smartphone and only charge low trading fees.

These providers focus on a range of equities and exchange traded funds rather than mutual funds and other assets.

Analysis suggests investors focusing on shares and ETFs could be better off with the smaller providers compared with better-known brands.

For example, Lightyear charges £1 for UK stock trades compared with investing platform giant Hargreaves Lansdown, which charges between £5.95 and £11.95 depending on the number of trades.

Lightyear doesn’t have a annual fee while Hargreaves Lansdown charges 0.45% per year with a £45 cap when holding shares.

Capital Economics was commissioned by Lightyear to compare its fees based with other ISA platforms.

It looked at investing costs when making the average ISA investment of £7,355, rising by inflation each year, with annual growth of 5% as well three US stock trades and three ETF trades annually.

The analysis suggests Lightyear would be almost £400 cheaper for investors than Hargreaves Lansdown after a year and around £7,000 cheaper over 25 years.

In another example, Moneybox, which offers risk-rated ISA portfolios of shares, ETFs and index funds, for a £1 monthly subscription fee and 0.45% platform fee, works out £250 more expensive after a year and around £27,000 more over 25 years, according to the research.

When compared with other app-based platforms, Trading 212, which only charges a forex fee and is commission-free, actually comes up £581 cheaper over 25 years.

However, Freetrade, which charges £4.99 per month for its stocks and shares ISA, shows as more expensive.

Wander Rutgers, UK chief executive of Lightyear, said: "People across the UK are being marketed to left, right and centre at the moment with ISA offers that look enticing on the surface; of course 1% cash back on transfers sounds good, but that same provider is also taking 1% of portfolio value back every single year in a custody fee, hidden deep within their pricing page. These fees are normally taken from your portfolio, so they’re very easy to miss…

“The stocks & shares ISA market is a complete lottery: most of us follow the herd and sleepwalk into this lottery by opening an ISA with one of the incumbent banks or brokers, accepting whatever fee we’re hit with. This money goes straight into the pockets of the providers, instead of to us. There's a huge inertia to leave, and that inertia is costing people a huge amount of money.”

The importance of shopping around

As with any sort of financial service, it is important to shop around and find the investment platform that best suits your needs.

Lightyear may be low cost but it doesn’t provide the full range of features such as other investing assets including mutual funds and research tools that you get with other providers so investors need to decide if these are worth paying for.

A spokesperson for Hargreaves Lansdown said: “One in three UK investors use Hargreaves Lansdown, making us the UK’s number one platform for private investors.

“Our clients tell us they highly value the full-service offering: the security of a trusted brand, the breadth of proposition and wide range of investment choices, fund discounts, as well as access to our quality and personal client service."

A spokesperson for Moneybox added that its platform fee is in line with industry standards, adding: “Our stocks and shares ISA offers a wide range of investment options—whether customers prefer expertly designed portfolios or want to build their own with tracker funds, exchange traded funds (ETFs), and individual US stocks. We also provide valuable tools and educational content to help our customers improve their financial literacy, become more confident investors over time and make informed financial decisions.

“Our platform fee is in line with industry standards, and we don’t charge trading or commission fees on US stocks. While some providers may currently offer a lower-cost structure, some investors may also want to consider whether that approach is commercially sustainable in the long term. Moneybox is committed to providing a stable, predictable pricing model so that we can continue to support our customers for years to come.”

If you haven’t yet maximised your annual ISA allowance, then time is running out: the deadline to use (or lose) your £20,000 annual contribution allowance into the tax-free wrapper is on 5 April. If you haven’t used your full allowance, why not consider an investment trust?

From the 2027/28 tax year, ISA contributions become more complex, and stocks and shares ISAs could be a valuable tool as the cash ISA portion of the total allowance is falling to £12,000 in April.

But adding the right investment trusts to your portfolio could help you realise superior returns over time, especially given historical trends for stocks and shares ISAs to outperform cash in the long term.

Investment trusts are a particularly useful investment to add to a stocks and shares ISA. They can borrow money to increase their exposure to promising investments, can often hold private companies, and can hold back up to 15% of returns in any given year which enables them to smooth out dividend payments over time.

Some of the most reliable investment trusts have used methods like these to increase dividend payments to investors for over 20 consecutive years.

While some of the most popular trusts among DIY investors include the likes of Scottish Mortgage, Greencoat UK Wind and the City of London trust, these are five the experts say are also worth a look this ISA season.

A general investment trust for your ISA: Alliance Witan

Hal Cook, senior investment analyst at Hargreaves Lansdown, picks Alliance Witan (LON:ALW) out as a potential core component of an investment portfolio thanks to its broad global exposure and multi-manager approach which adds diversification.

“It could be used to diversify a portfolio that is focused on tech or the US, by bringing in more diversified globally invested shares,” said Cook. “Or it could be used to boost the growth potential of a defensively invested portfolio.”

Alliance Witan is also a dividend hero – one of twenty UK-listed investment trusts that have increased dividend payments for twenty or more consecutive years. In fact, it is one of the top three on this list, having increased payouts in each of the last 59 years.

A defensive investment trust for your ISA: Personal Assets Trust

Personal Assets (LON:PNL) is part of the MoneyWeek investment trust portfolio and is also one of Cook’s picks thanks to its defensive qualities.

“It’s likely best suited to investors who either have an adventurously invested portfolio (potentially where the only investments are shares) who want to reduce the potential drawdown risk or those investors who are naturally cautious and are focused on protecting their capital,” said Cook.

“Alternatively, the trust can be used to simply diversify an investment portfolio in a straightforward way that investors can understand – there are no complex derivative strategies employed here, with the managers only investing in bonds, shares and gold.”

An investment trust for all seasons: Ruffer Investment Company

The world is less certain, so there is a good case to be made for holding an investment trust that is designed to account for market ups and downs.

Ruffer Investment Company’s (LON:RICA) ‘all-weather’ approach “could prove useful for the year ahead amid a landscape of geopolitical uncertainty”, said Rob Morgan, chief investment analyst at Charles Stanley Direct.

“The managers, wary of valuations in many parts of the stock market, combine conventional asset classes – global equities, bonds, currencies and gold – with the use of derivatives strategies that serve as protection during market downturns,” said Morgan. “The overall aim is to protect as well as grow over the long term, so the balance of different elements is designed to pay off in a variety of economic scenarios – rather than take too much risk in one area.”

Morgan added that the differences between Ruffer and most other portfolios makes this a potential diversifier, or a more stable long term core holding for investors.

An investment trust for UK growth: Edinburgh Investment Trust

Edinburgh Investment Trust (LON:EDIN) focuses on UK company shares, with an aim of growing capital and increasing dividends.

“For investors who want income from their portfolio, the UK stock market is a good place to start due to the typically higher dividends paid compared to other stock markets,” said Cook. This means it could make a good addition to a portfolio invested for income, or a diversifier for a portfolio focused on capital growth which might be tilted towards the US and global tech companies.

An investment trust for UK small caps: BlackRock Smaller Companies

BlackRock Smaller Companies (LON:BRSC) is a potential contrarian play if you believe that UK small caps are due a rebound.

“While the UK market has outperformed in recent months, smaller companies have been left behind, unloved and under owned – and are under pressure again amid the current volatility,” said Morgan. “An opportunity perhaps to consider BlackRock Smaller Companies whose experienced team led by Roland Arnold is well placed to capture any UK small‑cap revival.”

Another dividend hero, the trust has increased dividends for the last 22 years under the team’s management.

“An entry point into the Trust is complicated by the proposed merger with stablemate Throgmorton,” says Morgan. “The plan seems sensible given the considerable overlap between the two, and there’s the prospect of lower fees and improved discount control mechanisms.

“Nonetheless, the prevailing double-digit discount provides a valuation buffer for shareholders.”

Do Brits overlook their stocks and shares ISAs in favour of lower-risk, lower-reward cash savings?

As the end of the tax year approaches, ensuring that you maximise your annual ISA allowance is probably front of mind right now.

If you’re anything like the majority of Brits, though, you might be in danger of neglecting your stocks and shares ISA in favour of alternatives, like cash ISAs.

Research shows that stocks and shares ISAs beat cash ISAs, yet Brits are strangely reluctant to put their money into these higher-performing products. And, women in particular prefer to stick to cash.

“For UK investors this ISA season, there’s plenty of factors weighing on their mind: a new administration in the US, changing geopolitical risk and economic uncertainty at home,” says James McManus, chief investment officer at digital wealth manager Nutmeg. “The truth is, to greater and lesser extents, all of these will impact how markets perform this year, the level of volatility we see, and the returns investments will deliver.”

Before thinking about adding to a stocks and shares ISA, it is worth considering other financial priorities. Dan Coatsworth, investment analyst at AJ Bell, says you should first pay off any high-cost debts you owe, and ensure that you have a rainy-day fund held in an easily-accessible account paying the highest rate of interest you can find.

“As a very rough guide, experts usually say you should aim to keep around three months’ fixed expenses handy,” says Coatsworth.

Despite this, it appears that many Brits are overly cautious with their money, tending to veer towards saving over investing even though the latter tends to outperform over the long term.

What is the average amount in a stocks and shares ISA?

According to the latest figures from the Office for National Statistics (ONS), approximately 3.8 million stocks and shares ISAs were subscribed in the 2022/23 tax year, compared to 7.9 million cash ISAs.

While the average stocks and shares ISA contains more money than the average cash ISA – £7,355 compared to £5,296 – the fact that there are less than half as many of them means the amount subscribed is lower; £28 billion in stocks and shares ISAs compared to £41.6 billion in cash ISAs.

There is a gender divide in the kinds of ISAs that Brits use, indicating that women are more likely to save while men are more likely to invest. In the most recent year for which data is available, 1,907 men took out stocks and shares ISAs, compared to 2,789 who opened cash ISAs.

For women, the equivalent numbers are 1,413 for stocks and shares ISAs (lower than the male equivalent) and 3,736 for cash ISAs (higher than the male equivalent).

Given that stocks and shares ISAs returned an average of nearly 12% over the past year compared to under 4% for cash ISAs, Brits – women in particular – appear to be selling themselves short in terms of where they put their money.

ISA investments by age

There is a more understandable age discrepancy between the amount that Brits invest into their ISAs.

Note that the table below covers all forms of ISAs, not just stocks and shares ISAs:

^{Source: ONS}

Older Brits tend to have accumulated more into their ISAs – they’ve had more time to build up their savings, and more time for their investment returns to compound.

How much do I need to invest to be an ISA millionaire?

While Brits below the age of 25 seem to be making a good start on average, especially compared to the cohort immediately above them, but data suggests that if they want to enjoy an ‘ISA millionaire’ lifestyle, both these age groups will need to step up their saving and investing games.

According to Interactive Investor, investors in their mid-20s may need over £2 million in their ISA by the time they retire in order to enjoy the spending power of today’s ISA millionaires, due to the impact of inflation.

Even that assumes that inflation runs at the Bank of England’s 2% target rate. At present, it’s higher than that.

^{Source: Interactive Investor. Assumes annual inflation of 2%.}

“The ISA millionaire’s club of tomorrow will have a higher entry fee,” says Myron Jobson, senior personal finance analyst, Interactive Investor. “Those planning for the future must adjust their targets accordingly, because standing still in investment terms often means moving backwards in real terms.

Younger investors in particular would be sensible to look for the potentially inflation-beating returns of investing, rather than relying on cash, given the potential for inflation to eat into their savings over the long term.

“Simply saving isn’t enough,” says Jobson. “Investing wisely is key. Assets that outpace inflation over the long term, such as equities, can help protect and grow wealth over the long term.

“While market ups and downs are part of the journey, history shows that long-term investors who stay the course tend to fare better than those who sit on the sidelines.”

Where are UK investors putting their money?

So where are Brits turning in search of inflation-beating investments to top up their stocks and shares ISA?

Here’s how UK investors allocated the funds in their stocks and shares ISA in the most recent year for which ONS data is available:

^{Source: ONS}

OEICs are a clear favourite among UK investors, followed by unit trusts. After these types of funds, shares were the most popular form of stocks and shares ISA investment.

The cash component of this is unusually high – nearly as high as the amount invested into British or European stocks – further underscoring the notion that Brits are overly risk-averse when it comes to investing.

However, they do appear to have faith in their home market when they do invest.

Research from Nutmeg and Opinium shows that the UK is the most popular equity market among British investors, with 66% saying they were allocating here.

The US came second with 48%, while a globally diversified portfolio came fourth on the list at 21%.

“Despite the negative news surrounding the economy, UK investors are prioritising their home market this year,” said McManus. “Holding UK equities alongside the US, emerging markets, Europe and others may be the best way to capture emerging winners, reduce your investment risk, and benefit from global megatrends.”

There is lots of noise in the financial services industry about the pros and cons of combining your small pension pots, but what about consolidating your other investments, such as your individual savings accounts (ISAs)?

Platform fees can eat into your investments, so if you have more than one account, you could be paying more than necessary.

Consolidating your finances could help you reduce the amount you pay in management fees, as well as making it easier to monitor investment performance. Depending on the wrapper you use, it could also bring tax advantages.

An ISA or self-invested personal pension (SIPP) is generally the best wrapper for a DIY investor looking to shield their income and capital gains from the taxman. But there are instances where you might have opened another account too.

Not every investment is suitable for an ISA, including shares traded on exchanges that HMRC doesn’t recognise (such as the Shanghai Stock Exchange and Taiwan Stock Exchange).

ISAs and pensions are also subject to certain annual allowances, so some people open another account to continue investing once they have reached their annual limit.

This takes you to three different accounts already. If you also invest across several investment platforms, you could have even more.

With this in mind, we look at the case for consolidating your investments. How much could you save and what are the key things to look out for?

How much could you save in platform fees?

One of the biggest benefits of consolidating your investment accounts is a potential reduction in fees. The savings could come to hundreds or even thousands of pounds over a number of years, depending on the size of your portfolio.

Investment platform Interactive Investor has analysed the savings you could make by consolidating several ISA accounts. It found that an investor with a £100,000 portfolio, split equally between three major UK providers, could save £858 over a five-year period by consolidating their ISA pots.

This figure rose to £3,197 for an investor with a £250,000 portfolio, and to £6,396 for an investor with a £500,000 portfolio.

The calculations assumed annual investment growth of 5% per annum, with the accounts being consolidated into Interactive Investor's ISA (which has a flat-fee structure), but investors should do their own research to understand which investment platform would be cheapest for them. We share further analysis below.

“For many investors, ISAs are like a messy drawer – scattered across different providers, each charging their own fees, making it harder to keep track of performance,” said Myron Jobson, senior personal finance analyst at Interactive Investor.

“Consolidating multiple ISAs into a single account isn’t just about tidying up; it can lead to significant cost savings, greater efficiency, and better oversight of your investments,” he added.

The same principle applies across other types of accounts too – including regular investment accounts and, in some cases, pensions.

Before you consolidate your accounts, it is worth shopping around for the cheapest investment platform. This varies from investor to investor, depending on the size of your portfolio. Those with smaller sums to invest could be better off going with a percentage fee structure, while those with larger amounts might prefer a flat-fee structure.

We highlight the impact of percentage versus flat fees across three major investment platforms, looking at portfolios from £1,000 to £500,000.

^{Source: MoneyWeek. For illustrative purposes only. Calculations relate specifically to the providers’ ISA accounts. Calculations assume assets held are funds, as different fee caps apply for stocks and shares bought in an AJ Bell or Hargreaves Lansdown stocks and shares ISA.}

Transferring investments: what you need to know

When consolidating your investment accounts, there are some important considerations to bear in mind:

1. ISA transfer rules: Take particular care when transferring funds from one ISA to another, as failing to do this correctly could result in you losing your tax privileges on the sum in question. You need to contact the provider you want to move to, and complete an ISA transfer form.
2. “Bed and ISA” transfer: If you want to move assets from a regular investment account to an ISA to reduce your tax bill, you need to complete something called a “Bed and ISA” transfer. Make sure you leave enough time to do this, as the deadline for this sort of transaction is usually several days before the end of the tax year.
3. Tracking down lost investments: If you are tidying up your finances and think you might have lost track of some old accounts, get in touch with the provider in question to see if they can help. You will need proof of ID. If you can’t remember the provider you used, try putting your details into an online tool. There are different ones available depending on whether you are tracing a lost pension, lost shares, lost Premium Bonds or lost savings.

Many investors dream of reaching ISA millionaire status but what do you do once you reach that milestone?

The 2024/25 tax year has recently ended, and many investors will be looking to find the best stocks and shares ISAs to make use of their tax-free savings allowances in the new tax year – especially any ISA early birds that want to maximise their long-term returns.

Data from HMRC shows the number of ISA millionaires in the UK has surged to 4,850 — a near 1,000% increase since 2016 when there were only 450.

Andrew Prosser, head of investments at InvestEngine, predicts the number of ISA millionaires will rise. It comes despite speculation about the future of cash ISAs.

Prosser said: “A quarter of a century on from their launch, ISAs continue to be a crucial vehicle for so many when it comes to growing their wealth over time. We are now seeing that approach paying dividends, with the rapid increase in the number of both ISA millionaires and now multi-millionaires.

“Given the comparably limited long-term potential of cash ISAs, even for those who have maxed their accounts since their inception and received good interest rates, we can be confident that those attaining millionaire status have invested tax-free in the stock market via their ISAs.

“The findings are a reminder of the value that investing early and consistently in a diversified portfolio can bring when it comes to growing long-term wealth and why more people should consider investing as a way of reaching their financial goals.”

Recent data from the Association of Investment Companies highlighted the top investment trusts that have made investors ISA millionaires by consistently making use of their £20,000 allowance each year for 25 years.

How much do ISA millionaires hold?

ISA multi-millionaires can end up creating sizeable holdings in their accounts.

MoneyWeek obtained data from HMRC on the largest ISA accounts based on their total holdings.

There are 4,850 ISAs that hold £1 million or more – and some hold a lot more.

The majority of ISA millionaires (4,540) have between £1-2 million in their accounts. Approximately 250 have £2-3 million, and around 30 have between £3-4 million.

However, roughly 40 accounts hold more than £4 million – and the average amount held in these accounts is over £7.5 million.

^{Source: HMRC. *These figures are produced from data representing ISA account value as of 5 April 2022. The number of individuals in each group has been rounded to the nearest 10 and the mean market value to the nearest £1,000. Due to this rounding, not all rows sum to their total. It is not possible to further split the ‘greater than or equal to £4,000,000’ market value band due to statistical dominance and disclosure rules*}

While HMRC wasn’t able to share the precise amounts held in individual accounts, it seems reasonable to extrapolate that one or two ISAs may hold close to, or over, £10 million.

How difficult is it, then, to go from £1 million in your ISA, to many millions more?

How hard is it to become an ISA multi-millionaire?

The good news for ISA millionaires is that once you’ve made one ISA million, it gets easier to make more.

Research by AJ Bell suggests that if you invested £1,433 per month (a little over £17,000 per year) into a stocks and shares ISA and achieved annual growth of 6%, you would become a millionaire after 25 years.

But thanks to the power of compound interest – where your returns are automatically reinvested on top of your existing contributions – it only takes another 10 years to reach the £2 million mark. This makes it 2.5 times easier to make your second million tax-free.

The platform’s analysis shows that to get from zero to £1 million in 25 years you need to stump up £429,900 in total of your own money from saving £1,433 a month.

But to get from £1 million to £2 million by saving the same monthly amount, you would only need to stash away £171,960 yourself. Over a decade of saving, you would receive £859,189 in growth, according to the research.

Getting to your third million would only take a further six years of saving £1,433 a month.

During this time you would only need to stump up £103,176 in savings, with £874,067 accruing in fund growth. In total that means 41 years of saving £1,433 a month to get to £3 million.

Laith Khalaf, head of investment analysis at AJ Bell, said: “It’s no walk in the park to build up a million pound ISA, but once you get there, hitting new milestones becomes increasingly easy because you have a huge tailwind from growth on the money you’ve already stashed away.

“Happily, the helping hand of compound growth doesn’t just affect those with more than a million pounds clocked up; the same dynamic plays out no matter how much you’re saving each month.”

Compound interest of course isn’t only for the wealthy and will benefit all investors over the long-term.

It is also never too late to start.

Hargreaves Lansdown said the average age of its ISA millionaires is 72. So even if you are in your 40s or 50s, you could start putting money away now and still have time to reach the millionaire milestone.

The investment platform said it still has investors putting money away beyond age 100 with some centenarians also reaching millionaire status.

Sarah Coles, head of personal finance for Hargreaves Lansdown, said: “It’s the ultimate get rich slow success story, as investors build their portfolios slowly and carefully, so they have plenty of money to keep them secure in retirement.”

As the end of the tax year looms, many savers and investors may be trying to decide whether to pay more money into their cash ISA or stocks and shares ISA.

Some will be worried about speculation that chancellor Rachel Reeves is considering reducing the cash ISA limit in a bid to get savers investing and boost the UK economy. They may therefore choose to squirrel away more money into their cash ISA in case any changes are announced.

Falling cash ISA rates may also be a concern after the Bank of England cut interest rates earlier this month, and economists warn of more rate cuts to come.

This could make them favour investing in a stocks and shares ISA instead.

ISA customers have until midnight on 5 April to use up their £20,000 ISA allowance. Once the 2025-26 tax year starts, the current year’s ISA allowance is lost.

When weighing up whether to contribute to a cash ISA or stocks and shares ISA it’s also worth considering their performance.

Cash savers have enjoyed decent returns over the past few years, thanks to rising interest rates. The average cash ISA rate during the 12 months to February 2025 was 3.8%, according to Moneyfactscompare.co.uk.

This was higher than the 3.73% rate recorded a year earlier, and the 1.71% seen a year before that.

However, the average stocks and shares ISA has returned more than three times that amount. The average stocks and shares ISA returned 11.86% between February 2024 and February 2025, said Moneyfactscompare.co.uk, which analysed Lipper fund sectors.

Iain Barnes, chief investment officer at the wealth manager Netwealth, tells MoneyWeek: “It’s interesting that, over this period, investing in markets was better rewarded than holding cash, even at the high level of interest rates available last year.”

However, he adds: “This better performance isn’t unusual. Stocks and shares ISAs likely capture a wide range of underlying exposures and while we wouldn’t recommend investing for only one year, a diversified portfolio of riskier investment assets [often outperforms cash]. More importantly, the gap in performance increases over time, so that if investors are able to commit to a longer investment horizon, they are usually rewarded.”

Why did stocks and shares ISAs outperform cash ISAs?

The Moneyfactscompare.co.uk analysis looks across more than 40 Lipper fund sectors. It found that the best-performing sector was “financial and financial innovations” so if an investor solely invested their ISA in that sector they could have got a bumper 34.74% return.

North America, Japan and UK equity income also returned strong growth of 24.43%, 10.08% and 14.50% respectively over the past 12 months.

In contrast, the worst-performing sector was Latin America, which fell 11.15%.

Barnes notes that stocks and shares ISAs’ outperformance was due to “global economies proving more resilient to high interest rates than many people imagined, and markets generally performing well in response”.

He adds: “Equity markets are pushing higher amid relentless political noise and usually driven by events in the US. It is reassuring to see good performance broadening out from the group of very successful technology mega companies based in the US to other parts of the market, which have been less popular in recent years.”

What’s the outlook for this year?

Against a backdrop of falling cash ISA rates, stocks and shares ISAs may well outperform again over the coming year.

However, stock markets will also have their own challenges, such as weak economic growth due to global trade and fiscal policies, and stubborn inflation.

“Ultimately, stock markets will need to assess whether the current underlying strength of companies growing profits can offset the noise we all hear in daily newsflow,” says Barnes.

“Some parts of the market are expensive after the strong performance of recent years, but we recommend building a diversified portfolio over second-guessing where the best returns will come from. Even bond markets, where returns have been weak in recent years, now offer good yields which will be appreciated as and when cash rates come down. Simply put, we expect investors will continue to be rewarded for putting their money to work in the years to come despite the risks that lie ahead.”

Should I switch to a stocks and shares ISA?

It’s important to point out that past performance is not an indicator of future performance, and that investing is riskier than keeping your money in cash.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, notes that while savers may be intrigued to know that stocks and shares ISA growth outpaced cash ISAs over the past 12 months, “cash ISAs still have their part to play for customers, particularly the more risk averse”.

She adds: “The government’s freeze on income tax thresholds makes cash ISAs more attractive, as there will be more savers falling into the higher-rate tax bracket, effectively halving their personal savings allowance [from £1,000 to £500].”

Laura Suter, director of personal finance at the investment platform AJ Bell, tells MoneyWeek that the key question when choosing between a cash ISA and a stocks and shares ISA is: are you saving for the short term or the long term?

She explains: “If you’re setting money aside for an emergency fund, typically three to six months’ worth of expenses, then a cash ISA is a solid option. It keeps your money accessible while offering tax-free interest.

“But if you’re looking at medium- to long-term goals, such as saving for retirement alongside a pension, for a house deposit or home improvements in future, then a stocks and shares ISA can be a more effective route, given that markets tend to rise over time and outperform cash, despite short-term fluctuations.”

According to Suter, about three million people have more than £20,000 in a cash ISA without also holding a stocks and shares ISA, and over one million of them have more than £50,000.

She says this raises the issue of whether these “cash-heavy savers are missing out on long-term stock market returns. The Barclays Equity Gilt Study, which tracks data back to 1899, shows that over a 10-year period, UK equities have a more than nine in 10 chance of beating cash returns”.

Suter adds: “That’s not to say holding cash is inherently bad. Some people prefer the security of knowing their money is safe from market fluctuations. But it should be a conscious decision, rather than defaulting to cash and unthinkingly hoarding it.”

Stocks and shares ISAs are a popular way for people to start investing and secure tax-free benefits.

Over four million people (4.09 million) added money into a stocks and shares ISA in 2023/24, up from roughly 3.8 million in 2022/23, according to the latest data from HMRC.

Stocks and shares ISAs will likely become even more important for shielding money from the taxman in the future, after Rachel Reeves confirmed the cash ISA annual limit will be reduced from £20,000 to £12,000 for under 65s from April 2027.

It comes as the chancellor looks to foster a culture of investing in the UK to boost economic growth.

What is a stocks and shares ISA?

A stocks and shares ISA is a tax-efficient investment account. You can put up to £20,000 into ISAs each tax year, which starts on April 6 and ends the following April 5. This is known as the annual ISA allowance. You could put all £20,000 into a stocks and shares ISA, or split the allowance across different types of ISAs.

Stocks and shares ISAs carry more risk than a cash ISA, as the value of investments can go up or down. However, they can provide greater returns over long periods of time.

The average stocks and shares ISA fund grew by 11.22% in the year to February 2026, three times more than a typical cash ISA (3.48%) over the same period, according to research by Moneyfactscompare.

Clare Stinton, senior personal finance analyst at investment platform Hargreaves Lansdown, said: “Investing gives your money a real chance to outpace inflation and grow over time – opening the door to new possibilities that saving alone might not unlock.”

Stocks and shares ISAs are available to anyone over the age of 18 who is a UK resident for tax purposes. You may also be eligible if you’re a non-UK tax resident, for example if you’re a member of the armed forces or a crown servant living abroad.

How do stocks and shares ISAs work?

A stocks and shares ISA allows you to invest in a wide range of assets including shares, funds, investment trusts and bonds with no tax owed on any gains.

Stocks and shares ISAs can be set up through banks or investment platforms. There are several different types to choose from.

The first – a self-select or DIY stocks and shares ISA – allows you to pick your own shares, funds or bonds. This option is best-suited to someone who wants to manage their portfolio, although it can be more time-consuming.

The alternative is a managed stocks and shares ISA, which can either be monitored by a fund manager, or an automated service, often called robo-investing.

Managed accounts typically work by letting you choose a profile based on your risk appetite. Your assets are then arranged depending on this appetite.

For example, an ‘adventurous’ profile might invest more in, typically, riskier equities than bonds, while a ‘tentative’ one might invest more in bonds and less in equities. Managed stocks and shares ISAs can be useful for investors wanting to take a more hands-off approach.

How to open a stocks and shares ISA

When applying for a stocks and shares ISA, which can usually be done on the provider’s website, you will often need details like your name, date of birth, National Insurance number and address to hand.

Once the account is set up, you can start investing with a lump sum or by setting up regular payments. Regular payments can usually be made monthly and allow you to start investing with smaller amounts on a consistent basis.

Is a stocks and shares ISA tax-free?

Returns in stocks and shares ISAs are free from income tax, and do not need to be declared on any tax or self-assessment forms.

Returns are also sheltered from capital gains tax – the tax paid on profit when an asset is sold.

Any losses made on investments within this ISA cannot be used to offset capital gains applicable on other investments.

Dividend income tax also does not apply to stocks and shares ISAs, allowing tax savings on dividends exceeding the £500 tax-free allowance.

Are stocks and shares ISAs subject to inheritance tax?

While stocks and shares ISAs are shielded from the impact of capital gains tax and income tax, the same cannot be said for inheritance tax.

ISAs count towards your estate (meaning the property, money and possessions of someone who has died). Inheritance tax is usually payable on parts of an estate above the £325,000 threshold – although some people may be able to increase their threshold. The standard inheritance tax rate is 40%.

Spouses and civil partners can pass assets to each other inheritance tax-free.

You can pass on your ISA to a surviving spouse or partner and they can continue to receive income and growth from it tax-free through an Additional Permitted Subscription (APS).

This also means the money in the ISA will not be subject to inheritance tax due to the 100% spousal IHT exemption, though it will form part of your partner's estate when they die.

How many stocks and shares ISAs can I have in the UK?

Individuals can hold multiple ISAs in the same tax year. However, deposits must stay within the annual £20,000 ISA allowance.

Holding two or more stocks and shares ISAs can give you greater access to a wider selection of investments, although it may be more time-consuming than having one.

Stinton, from Hargreaves Lansdown, said: “Whether you choose to spread your ISAs or have everything under one roof often comes down to personal preference. Keeping everything with one provider means less admin, fewer passwords and paperwork, and a straightforward snapshot of how your money is performing overall. However, some people may like the idea of having separate ISA pots for different goals, allowing them to separate their kid’s tuition money from their future travel plans.”

Can you transfer stocks and shares ISAs?

Stocks and shares ISAs can be transferred from one provider to another and there are two ways you can do it – via an in-specie transfer or cash transfer.

You must contact both your current and new providers, typically by completing an online form or by visiting a local branch.

But there are things to consider before putting in a transfer.

Stinton, from Hargreaves Lansdown, said: “It’s worth pausing to think about the bigger picture. This is your hard-earned money, so where you keep it – and the provider you trust to look after it – should reflect what matters most to you. Consider whether this is a slick and easy-to-use app or reliable customer service with someone you can actually speak to.

“If a time-limited deal is your main motivation, make sure you read the small print and double check for any exit fees that may hit you on the way out.”

Do note, you may be charged a fee by your existing or new broker for transferring an ISA.

Can stocks and shares ISAs be transferred into cash ISAs?

A stocks and shares ISA can be transferred into a cash ISA, and vice versa. You can decide how much you wish to transfer – you might want to transfer just part of the ISA or the full amount.

Cash ISAs and stocks and shares ISAs are not an either/or option. You can hold money in cash ISAs as well as stocks and shares ISAs. Plus, you can hold cash within a stocks and shares ISA – although it may have a lower interest rate than competitive cash ISAs.

You could pay cash into a stocks and shares ISA to use up this year's allowance, and then invest it at a later date when you’re ready.

Our cash ISA vs stocks and shares ISA guide explores how to choose between the different types of ISAs.

Becoming an ISA millionaire – someone with £1 million or more held in ISAs – is probably the dream of many investors who want to make the most of the tax wrapper.

Though it may sound far-fetched, joining this coveted club is not as impossible as some think – provided you are smart with your money.

There were around 4,850 ISA millionaires in the 2021/22 tax year, the most recent year with available data, according to a Freedom of Information request sent to HMRC by wealth manager Murphy Wealth.

The first step to join this club is to start investing. Of these 4,850 ISA millionaires, 94% (4,560) got to this milestone by using the stocks and shares ISA alone, according to the data.

The remaining ISA millionaires (290) had a combination of both a cash ISA and a stocks and shares ISA which reached or exceeded a value of £1 million when combined.

Not a single ISA millionaire had their wealth stored in a cash ISA alone.

Once you start investing, you will need to adopt the same investment habits as an ISA millionaire. They are often astute investors who know and apply their investment fundamentals when managing their money.

For example, many of them have a strong understanding that investing in their ISAs regularly and early can help boost their long-term returns.

Adrian Murphy, chief executive of Murphy Wealth, said: “Almost all ISA millionaires have built their wealth by holding stocks and shares – and no one has got to that status holding cash alone. It only serves to underline why more people in the UK should consider investing their money.

Some people are put off investing because they perceive the stock market as risky compared to hoarding cash.

“But the reality is quite different,” said Murphy. “Historically, a balanced portfolio of stocks and shares has delivered far higher returns over most reasonable timeframes, while cash savings have often failed to beat inflation.”

It could take years of shrewd investing and discipline in order to become an ISA millionaire, but that is no reason to avoid starting.

We look at how ISA millionaires invest, their favourite funds, and how you could join the club.

How to invest like an ISA millionaire

One of the best moves you can make to maximise your returns is to invest early and keep going at it.

In the context of building up your ISA wealth, this means maximising your ISA limit at the start of each tax year (1 April).

Almost a third (30%) of Hargreaves Lansdown's (HL) ISA millionaires topped up or opened an ISA in just the first two weeks of the 2025/26 tax year.

This was also the case in the previous year, with HL reporting that 34% of ISA millionaires topped their accounts up in the first two weeks of the 2024/25 tax year.

While the timing of your investments may sound like a minimal factor, research by financial advice firm Bowmore Wealth found that investing early pays off in the long term.

They found that ISA investors who maximised their ISA limit at the start of the tax year have earned around £123,000 more than those who waited until the last day of the tax year to invest over the last 20 years.

By investing early, savers allow their investments to make the most of compounding throughout the course of the year, and let their money grow more than if they had invested it at the end of the year.

Victoria Hasler, head of fund research at Hargreaves Lansdown, said: “ISA millionaires know the importance of compounding. They have heard and understood that old investing adage that it’s not timing the market, but time in the market that matters.”

This is also supported by the fact that just 2% of ISA millionaires invested in the last week of the 2024/25 tax, according to HL, with Hasler noting that this shows a level of discipline and good organisation.

Apart from making sure to invest early in the tax year, ISA millionaires also put their money in slightly different investments than other savers.

Where are ISA millionaires investing?

The most popular investments with ISA millionaires in the first weeks of the 2025/26 tax year were blue-chip companies, including a good mix of dividend stocks.

The average age of the club could partly explain this preference. The average age of an ISA millionaire in 2024 was 74 (though the youngest was 28) and older investors often seek dividend income to support them in retirement, according to HL.

ISA millionaires are also more likely to top up or buy active funds than non-millionaires, HL’s research found, with six of the 10 most popular funds being run by active managers.

Of these active funds, four were global, but two, including the most popular fund, were UK-based. Hasler suggests: “Maybe ISA millionaires can now see value in the UK market.”

Other popular investments for ISA millionaires include UK stocks within the FTSE 100.

“There was a preference amongst our ISA millionaires for higher-yielding stocks, consistent with the popularity of income-focused funds,” says Hasler.

Most popular non-fund investments with HL ISA millionaires (7-17 April 2025)

• Comtech Telecommunications
• Legal & General Group plc
• BP Plc
• Hexagon Composites ASA
• AstraZeneca plc
• Shell plc
• Treasury 4.75% 22/10/43 - Gilt
• Genel Energy plc
• GSK plc
• Lloyds Banking Group plc

Most popular funds with HL ISA millionaires (7-17 April 2025)

• Artemis Income
• Legal & General European Index
• Legal & General International Index Trust
• Legal & General Global Technology Index Trust
• Rathbone Global Opportunities
• Legal & General UK 100 Index Trust
• Lindsell Train Global Equity
• Legal & General US Index
• BNY Mellon Global Income
• Artemis Global Income
• Artemis High Income

Furthermore, the investment platform says the majority of its millionaires have taken a measured approach to investing, opting for a well-diversified portfolio rather than making high-risk bets on volatile positions.

“Some people get into investment in the hope of ‘getting rich quick’, but the vast majority of ISA millionaires have built a fortune through the far more reliable approach of getting rich slowly,” says Kate Marshall, investment analyst at Hargreaves Lansdown.

“They don’t necessarily take enormous risks: many consistently invest as much as possible of their annual allowance in a diverse and balanced portfolio, every year, for decades,” she adds.

While HL’s ISA millionaires took a liking towards UK funds and stocks at the start of the tax year, this is not to say that all ISA millionaires think this way.

Indeed, ISA millionaires who use Fidelity’s investment platform favoured funds outside the UK with six of the ten most popular funds purchased by Fidelity’s ISA investors were weighted at least 50% to US stocks, with several also having a strong focus on tech equities.

• Legal & General Global Technology Index Trust
• UBS Global Enhanced Equity Income Fund
• Legal & General Cash Trust
• Fidelity Index US Fund
• Fidelity Multi Asset Open Strategic Fund
• Legal & General Global 100 Index Trust
• Orbis OEIC Global Balanced Fund
• Fidelity Index World Fund
• Fidelity Cash Fund

Could you become an ISA millionaire by 2032?

The number of ISA millionaires has risen rapidly in the last seven years, growing from a base of just 168 in 2017. That raises the question: how many more ISA millionaires will there be seven years from now (2032)?

With an annual ISA limit of £20,000, the only way you will be joining the club by 2032 is if you have started investing already.

Despite this, you might be surprised at how quickly your nest egg grows if you adopt a regular investment habit and take a long-term approach.

Naturally, the time it will take you to become an ISA millionaire will depend on how much you are able to invest each tax year, and the level of return you are able to achieve.

Assuming you max out your annual £20,000 ISA allowance every year, investing around £1,666.66 per month, and achieved an annual growth rate of 5% per year, it would take you 26 years to join the millionaire club, based on figures we plugged into Hargreaves Lansdown’s investment calculator.

By the end of the 26-year period, you would have a portfolio worth £1,049,744. Almost £520,000 of this would have come from your own contributions. Roughly £530,000 would have come from investment growth.

If you managed to achieve an 8% annual return on your ISA portfolio, investing the same monthly amounts as outlined previously, it would take you 21 years to become a millionaire.

Depending on the funds or stocks you decided to invest in, your return could be higher or lower than this amount. Over the long term, the average US stock market return is closer to 10% per year.

Some years, investors will make losses if markets take a downturn but, other years, their investments will experience strong growth. In 2024, the S&P 500 grew by more than 23% based on price returns. In the year to 3 November 2025 the index is up around 16%.

So, to become an ISA millionaire by 2023, would need to already have a portfolio worth around £592,000 and to keep maxing out your £20,000 ISA allowance each year to be in with a chance, assuming a 5% rate of annual growth.

Assuming an 8% annual return, you would already need a portfolio worth around £475,000.

Transferring an ISA can bring with it a number of perks, such as better customer service, higher interest rates or lower fees.

But there are rules to consider before doing a transfer to make sure you don’t lose any tax-free benefits.

Furthermore, a major rule change is coming into effect from April 2027.

From this date, the transfer of money from stocks and shares ISAs to cash ISAs will be banned and a charge will be applied on any interest accrued on cash held in a stocks and shares ISA.

The change is being brought in by the government as ministers look to push more savers towards investing in the stock market.

But experts have warned the change could make for a more siloed and isolated ISA market.

Rob Morgan, chief investment analyst at wealth management firm Charles Stanley, said: “It (the change) makes it harder for people to change course from investing as their circumstances evolve, especially in the absence of cash equivalent options in a stocks and shares ISA,” Morgan said.

But for those considering transferring an ISA under the current rules, we’ve explained all the need-to-knows below.

How to transfer an ISA to another provider

The main thing to remember when transferring an ISA is to not withdraw the money first.

Instead, you need to contact the provider of the ISA you want to transfer to. The provider should give you an ISA transfer form for you to fill in.

If you don’t follow this process while transferring a stocks and shares or cash ISA, they will lose their tax-wrapped status.

Bear in mind, not all ISA providers will allow you to transfer your account to them, so make sure you check beforehand.

Also note that if you’re transferring from stocks and shares ISA to another stocks and shares ISA, you may have to pay an exit fee to your current provider.

How long does it take to transfer an ISA?

It takes considerably longer to transfer an ISA than a standard bank transfer.

The transfer time varies depending on the provider a person is using, however, cash ISA transfers are the fastest, typically taking no longer than 15 working days.

This will usually be slightly longer for other types of ISAs, with stocks and shares ISAs and innovative finance ISAs usually transferring within 30 days. This is because there are various additional steps to take into consideration with this type of account. For example, a stocks and shares ISA may have to be re-registered if a person is switching to a new provider.

There are ways savers could potentially make the process of transferring an ISA quicker. Discussing the transfer with both current and new providers will likely help to smooth out the process, as will ensuring all paperwork is accurate and up-to-date.

Experts typically suggest busy transfer times, such as the end of the tax year, should be avoided for those hoping to secure a fast transfer.

If you are unhappy with the length of time your ISA transfer has taken, you should contact the ISA provider. If you deem the response unsatisfactory, you can directly contact the Financial Ombudsman Service, with evidence of your transfer request.

Our guide on ISAs vs savings accounts looks at the pros and cons of these types of accounts.

Does an ISA transfer count as a new ISA?

An ISA transfer does not count as a new ISA subscription, and while you may need to set up a new account to move your money to, the savings can also be transferred to an already existing ISA.

The money you have already put into your ISA will remain tax-free even if you transfer it to another ISA, and you can continue to build on the savings you have already amassed.

There isn’t a limit on the number of times a person can transfer an ISA in one year.

Does transferring an ISA affect the annual ISA allowance?

An ISA transfer does not count towards your annual ISA allowance.

If you make a subscription to an ISA during the current tax year, that contribution will count towards your annual allowance of £20,000. This is regardless of whether or not you later transfer it to another ISA. Any transfer you make of the subscription will not reset or increase the limit.

For example, if you deposit £1,000 into an ISA, you will have used £1,000 of the £20,000 allowance, leaving £19,000 available. However, if the money is then transferred to a different ISA, the transfer itself will not count as a new subscription. Therefore, the ISA investor will still have £19,000 of the allowance remaining in the same tax year.

There have also been recent rule changes concerning ISAs that benefit those who wish to hold multiple accounts, and potentially make multiple transfers.

There are four different types of ISA (cash ISAs, stocks and shares ISAs, Lifetime ISAs and innovative finance ISAs) and previously, savers could only put money into one of each type of ISA each tax year.

As of 6 April 2024, you can now open and pay into more than one ISA of the same type in the same tax year, as long as the amount does not exceed the maximum allowance of £20,000. This doesn’t include the Lifetime ISA. You can only pay into one Lifetime ISA each tax year, up to a limit of £4,000 (which is included in the annual ISA allowance).

The change allows "greater flexibility”, explains Andrew Prosser, head of investments at InvestEngine. He adds that it lets savers and investors “try out different accounts if they find a better offer elsewhere, such as lower account fees and the opportunity to invest in different types of funds”.

While transfers between providers do not impact ISA allowances, savers will have to bear potential fees in mind when moving their money. In certain circumstances, there may be a penalty payment or a fee for transferring an ISA, which is why it is important to read the terms set out by both old and new providers.

A new provider may also levy an ongoing charge or a platform fee once the ISA is transferred. Checking this before the transfer process begins could reduce the chances of a nasty surprise later down the line.

We compare cash ISAs versus stocks and shares ISAs in a separate piece.

Can you transfer an ISA to another person?

The simple answer is no. ISAs cannot be transferred to another person.

"The tax benefits for an ISA account are only intended for the person who opened it. If you'd like to give the money in your ISA to someone else, you'd have to close the account and transfer it there,” says Prosser.

There are, however, certain ISA transfer rules that come into play if your spouse or civil partner passes away.

In this case, you can inherit their ISA allowance, but will need to contact the relevant provider for further information.

Since April 2015, people have been able to make use of the ISA benefits belonging to their deceased spouse or civil partner if they passed away on or after 3 December 2014.

This does differ to inheriting the money contained within the ISA, as these funds are allocated to whoever was nominated in the individual's Will.

Can you transfer shares from a general investment account into an ISA?

You can transfer funds from a general investment account (GIA) into a stocks and shares ISA, although it will count towards your annual £20,000 allowance.

HMRC doesn’t allow the direct transfer of investments from a non-ISA account to an ISA, with investments having to be sold first.

However, ISA providers can carry out a ‘Bed and ISA’ transaction. It involves selling shares or funds held within a GIA and then repurchasing them within a tax-wrappered ISA.

The time it takes for a Bed and ISA to complete depends on the provider, but it can be as long as 10 working days.

Can you do partial transfers?

You are allowed to make partial transfers between ISA providers, regardless of when the money was paid into that account. This is following a rule change which took effect in April 2024.

Under the old rules, customers had to transfer all of the funds from one ISA of that type from the existing tax year or nothing at all. The change means you can keep some money with your existing provider and retain that ISA.

What are the benefits of transferring an ISA?

There are several benefits to transferring an ISA. For example, finding a new ISA may help you secure a better return on savings or investments.

Transferring an ISA to another can help you consolidate your ISAs and make it easier to manage them all too.

Additionally, an ISA transfer can help with risk management. For example, cash ISA savers may wish to avoid the eroding impacts of inflation by putting their money into a stocks and shares ISA. This does carry risk, and investors could get back less than they initially put in. However, in the long term, there is potential to grow your money.

In contrast, those looking to substantially reduce risk for short-term goals may wish to transfer money out of investments and into cash savings, particularly if they wish to access their money in the near future.

Transferring a stocks and shares ISA from one provider to another can mean lower ongoing fees like annual platform charges.

Transferring an ISA can bring the perk of better customer service too, if you’re unhappy with your current provider’s level of support.

Investment giant Vanguard has urged customers to review their account in light of recent fee changes, warning its service “may no longer be right” for them.

The investment platform introduced a £4 minimum monthly fee for DIY investors last month (28 February), having previously charged just 0.15% per year.

The changes impact smaller investors with less than £32,000 in their ISA, SIPP or general investment account. Those with more will continue to pay 0.15%.

It means someone with £1,000 in their account will now pay £48 per year in account fees, up from £1.50 previously – equivalent to 4.8%.

For context, the FTSE 100 delivered a total return of 9.7% in 2024, meaning the Vanguard fee would have wiped out approximately half of your returns in this example.

In an email to some customers, seen by MoneyWeek, Vanguard warned that the new fee could “erode” their pot if they made “no or insufficient contributions”.

Customers should either invest more regularly to get better value for money, the email suggested, or consider switching to a managed-ISA or managed-SIPP account where the £4 monthly charge does not apply.

Alternatively, they could choose to close their account, withdrawing the money or transferring to another provider.

While you are under no obligation to follow the guidance in the email, it would be unwise to leave your money where it is if you only have a few thousand pounds in the account.

As Holly Mackay at the consultancy Boring Money points out, the minimum fee effectively ends Vanguard’s “reign as the lowest-cost option for smaller DIY investors seeking some choice”.

Investors may want to take heed of Vanguard’s warning and shop around for a better deal elsewhere. Just remember that there are rules and tax implications when moving money from an ISA or SIPP, so it is important to follow the proper transfer process.

How is Vanguard changing its fees?

Vanguard has recently made two changes to its fees for UK customers.

The first change was the introduction of the minimum account fee of £4 per month (£48 a year) on balances up to £32,000. This applies to self-managed ISAs, SIPPs and general accounts, and replaces the current 0.15% annual charge.

The platform said the change was “necessary to help us cover the rising cost of serving our clients”.

The account fee of 0.15% per year for balances in excess of £32,000 remains unchanged, and continues to be capped at £375 per year.

The minimum fee does not apply to Vanguard’s junior ISA or managed-service offering.

The second change was a cut to the fee on its “managed-ISA service”. The management fee was reduced from 0.3% to 0.2% at the end of January.

This took total fees on the managed ISA to just over 0.5%, consisting of a 0.15% platform fee, 0.2% management fee and average 0.17% fund fees. There is no minimum account fee.

Ben Summers, Vanguard’s head of personal investor services in the UK, said the change to the platform’s managed-ISA service would help “many first-time investors manage and grow their money”.

He added: “We’ve found that once people have made the important decision to start investing, they can lack confidence in the management of their investments, hold too much cash, and have trouble constructing portfolios with the right funds and level of risk.

“This service selects and manages investments on a client’s behalf, and a team of Vanguard investment experts are on hand to give guidance.”

According to Justin Modray, founder of Candid Financial Advice, if you’re happy to let Vanguard choose and manage a mix of funds for you, then the managed ISA “looks very good value at 0.52% a year all in”. He added: “That said, Vanguard is restricted to its own funds, whereas most other platforms offer funds from across the market”.

How competitive are the new fees?

The new £48 annual charge makes Vanguard’s fees less competitive for new investors and those with smaller balances.

All customers with an ISA, SIPP and/or general investment account with less than £32,000 invested across them will see their fees go up.

Mackay comments: “Vanguard’s USP has always been about cost. Not service. This move has a subtle impact. It removes them from being an option where no one needed to worry about cost, to an option where people need to do the maths. They are not the slam dunk they once were.

“We saw a similar thing in 2019 when Charles Stanley moved its admin fee from 0.25% to 0.35%. Overnight, they lost their USP – always being the cheapest – so consumers lost the ‘no-brainer’ reason to select them.”

She agrees with Modray that Vanguard’s managed ISA now looks “more compelling”, so could be a good option for less confident investors.

^{Source: The Lang Cat. Notes: Pricing is for annual cost, as of July 2024 (bar the new pricing for Vanguard). Assumes investing in an ISA / general account for funds only, with 12 ad-hoc trades a year.}

Which are the cheapest investment platforms?

Platforms like AJ Bell, Bestinvest and Hargreaves Lansdown now work out cheaper than Vanguard for small accounts.

For example, on a £1,000 investment, Bestinvest charges 0.4%, which would mean fees of £4 a year. Hargreaves Lansdown, Britain’s largest DIY investment platform, charges up to 0.45%, so £4.50 a year on a £1,000 investment. This compares to Vanguard’s new fee of £48 a year. These platform charges exclude fund fees.

According to the analyst Platforum, a customer with £10,000 split equally across an ISA and a personal pension would pay a total fee of £70 a year with Vanguard, including the fund charges. In contrast, AJ Bell’s cost amounts to £47 while Hargreaves Lansdown’s fee comes to £67.

Those facing a hike in fees with Vanguard and wanting to switch to a competitor could consider AJ Bell’s app-only service Dodl. It charges 0.15%, the same amount that Vanguard used to charge, and is designed for beginner investors.

Steve Nelson, insight director at The Lang Cat, a consultancy, said: “Investors need to take many factors into account when looking at how platforms compare on cost. The type of asset being invested in, how often you’re likely to trade, and which wrappers you use are all examples that can affect pricing – alongside sums invested.”

The number of ISA millionaires has more than tripled in three years, according to a Freedom of Information request to HMRC.

In 2022/23, there were 3,180 ISA millionaires. This compares to 1,030 three years ago, and just 570 eight years ago.

Analysis by the investment platform InvestEngine reveals that there are also 7,000 people in the UK with ISAs worth between £750,000 and £1 million, while 30,000 have between £500,000 and £750,000 in their ISAs.

The figures come as Rachel Reeves prepares to deliver her Autumn Budget next week, with speculation growing that the chancellor could impose a lifetime limit on ISA savings. It has emerged that Reeves previously floated the idea of a £500,000 limit in a newspaper column in 2016.

Savers and investors can contribute up to £20,000 a year into their ISAs, but there is no cap on how much they can save in their lifetime.

Subscriptions into ISAs have been surging in the run-up to the Budget. The investment platform Bestinvest said ISA contributions rocketed 156% in September compared to the same month in 2023.

The investment giant Vanguard has seen a 43% increase in the number of clients using up their ISA allowance, while Interactive Investor has seen the number of customers maxing out their ISAs soar 65%.

Some of this behaviour has been to beat any potential changes to ISAs in the Budget - which will be delivered on 30 October - as well as any hikes to capital gains tax.

Notwithstanding any announcements in next week’s Budget, ISAs are a great way to grow your wealth tax-free - as is evidenced by the thousands of people who have managed to turn themselves into ISA millionaires. We look at how they’ve managed to hit this milestone.

How to become an ISA millionaire

To amass a £1 million fortune in your ISA, you’ll almost certainly need to invest, rather than use a cash ISA.

Andrew Prosser, head of investments at InvestEngine, comments: “The number of ISA millionaires has increased significantly over the past few years, but we can be confident that most people with really big sums are in stocks and shares rather than cash ISA holders.

“That is because, even someone who has put the maximum in a cash ISA every year since they were launched in 1999 would be at around £275,000 – a great sum, but well short of millionaire status.”

Over the past decade, the average annual return on stocks and shares ISAs has been 9.64%, while over that same period, the return for a cash ISA has been just 1.21%.

According to InvestEngine, if those averages continue, those who put away the maximum amount into a stocks and shares account could be an ISA millionaire by 2043 - 19 years from now. By comparison, it would take someone with a cash ISA earning the average rate of interest until 2063 - an extra 20 years - to reach the millionaire milestone.

Prosser adds: “Getting started early each year, even with just small amounts, and not leaving investing until the end of the tax year, creates the potential to grow large sums for later in life.”

We reveal what type of investments and which funds are most popular with ISA millionaires in More investors are becoming ISA millionaires – where are they putting their money?

If you have money in low-interest accounts, consider switching it to a higher-paying savings account, or into a cash ISA or stocks and shares ISA. Using an ISA will protect your money from the taxman, which could be particularly valuable given tax hikes are widely expected in the Autumn Budget.

Will we see ISA changes in the Budget?

ISAs are incredibly popular. About 22 million people have an ISA, with their total market value worth £725 billion.

Previous governments have increased the annual allowance to the cheers of savers and investors. In 2017/18 George Osborne hiked the allowance from £15,240 to its current £20,000, turning the humble ISA into a “super ISA”.

So, it would be a brave chancellor to tinker with ISAs and reduce their generosity.

As with all Budget rumours, there has been no official word from the government. We know that Reeves has spoken of a £500,000 limit, but that was eight years ago, long before she became chancellor and the economic picture looks very different now.

But of course, the economic picture looks very bleak, according to the Labour government, and we are regularly reminded that next week’s Budget will contain “tough decisions”.

One expert who thinks ISAs could make an appearance in the Autumn Budget is Elsa Littlewood, private wealth tax partner at the accountants BDO. She says ISAs are costing the Exchequer almost £5 billion a year in tax relief.

“Cutting this cost by reining in ISA benefits for wealthy investors might be seen as an easy way to help balance the books.”

She adds: “It’s not impossible that the chancellor could seek to impose a lifetime cap on ISA saving – perhaps at around £500,000. We could also see a reduction in the annual allowance available for cash ISAs, but an increase in the annual allowance for stocks and shares ISAs in an effort to support economic growth.”

Trading platforms have started letting investors put fractional shares in their ISA again ahead of an expected change in HMRC rules.

The taxman had been working with the Treasury and the Financial Conduct Authority (FCA) on changes to ISA rules since the end of 2023 amid the rising popularity of trading apps that let users purchase fractional shares through the tax wrapper. Current ISA regulations didn’t specifically permit portions of shares to be used in a stocks and shares ISA, raising fears that investors may have to sell their fractional share holdings from an ISA.

But the rules are now expected to be officially amended, possibly even before the Autumn Budget, after investors and trading apps were last month given the go ahead to continue backing fractional shares and receiving tax-free returns through an ISA with no penalties.

An HMRC spokesperson said: “The government has committed to changing the ISA rules to allow certain fractional shares. Taking a pragmatic approach, we will not raise an assessment on managers or investors for fractional shares acquired before these changes are made.”

What are fractional shares?

A fractional share lets an investor buy a portion of a stock rather than paying the full share price. They have become more popular since the emergence of trading apps that let you buy and sell shares from your smartphone.

It provides a cheaper way to start investing and build a portfolio, which can appeal to younger investors with less money to put away - or even those nervous about committing too much. This means any returns are equivalent to how much they have invested. They are popular in the US where share prices are particularly high and brokers argue that it lowers the barriers to entry for retail investors.

Not all investment platforms offer fractional shares and you will mainly find them on newer trading apps. Some platforms may let you buy and sell fractional shares but only in a general investment account.

Here are the financial apps and investment platforms that will let you put fractional shares in an ISA:

Freetrade

Stock trading app Freetrade previously let users buy US fractional shares through its self-invested personal pension, general investment account and ISA. It had stopped allowing new investment into fractional shares through an ISA while the rules were clarified.

Anyone with fractional shares in an ISA could keep them in their portfolio but were unable to add new ones. The trading app announced this week that users can now purchase US shares through its Freetrade ISA again.

Etoro

Investors on eToro can put money into fractional shares through its general investment account but it is currently not possible through an ISA.

Dan Moczulski, managing director of eToro UK, told MoneyWeek: "Whilst we offer fractional shares on the eToro platform, we currently do not offer fractional shares as part of our ISA solution.

"Nonetheless, we are strong advocates of fractional shares and allowing them in ISAs is a sensible move from HMRC and the new Labour government. This will reduce barriers to investing for Brits, as more savers will be encouraged to put their cash to work if they can easily diversify their portfolios with smaller amounts of money without having to pay tax.

"Crucially, fractional shares in ISAs also give people the freedom to invest and withdraw the exact amount of money that they want, rather than being forced to take out smaller or larger amounts, just because their ISA holdings need to be made up of whole shares."

Trading 212

Trading212 lets users buy fractional shares and exchange traded funds through its ISA. It was so confident that HMRC would allow them that it didn’t even stop new investment while changes were being considered.

InvestEngine

InvestEngine lets users build a portfolio of exchange traded funds. This can be done through its ISA by purchasing fractional shares.

Moneybox

Moneybox has also consistently let users include fractional US shares in its stocks and shares ISA, alongside funds and exchange traded funds. Brian Byrnes, head of personal finance at Moneybox, said: “We, like other platforms, had interpreted that the original ISA legislative wording, which was introduced prior to fractionals existing, allowed for fractional shares within the ISA wrapper.

“We have been consistent with our offering and messaging to customers while awaiting clarity from HMRC. “

Byrnes welcomed HMRC officially changing the regulations, adding: “It is widely recognised that far more people could be benefiting from investing than are currently doing so. If the past few years have taught us anything, it's that as a society we need to take financial resilience more seriously and, the truth is, financial resilience is mostly about enabling more people to build wealth throughout their lives.

“Thankfully, the environment is slowly changing, and clearing up any perceived ambiguity around fractional shares will allow more people to build diversified investing portfolios from much lower starting amounts. More progress on the Advice Guidance Boundary Review and pensions dashboards will also be welcome.”

Junior ISA wealth is booming, with hundreds of lucky children boasting pots worth more than £200,000.

According to HMRC figures for the 2021-22 tax year, 370 youngsters have built fortunes bigger than £200,000, a sharp rise from just 40 in the previous year.

The top 50 child investors are sitting on junior ISAs averaging a massive £761,000 – putting them firmly on track to join millionaires’ row in their 20s.

The wealth manager RBC Brewin Dolphin, which used a Freedom of Information (FOI) request to obtain the data, said it “may only be a matter of time before HMRC confirms the existence of the UK’s first junior ISA millionaire”.

There are already plenty of adults who are ISA millionaires. An FOI request earlier this year revealed that the 25 largest adult ISAs are worth more than £11.6 million. The UK’s biggest investment platform, Hargreaves Lansdown, says 1,160 of its customers are ISA millionaires.

It’s harder for kids to accumulate large amounts in junior ISAs, as the maximum time frame to invest is from birth to age 17. In comparison, adults have their entire life from age 18 to save and invest in an ISA.

Plus, the junior ISA allowance is much smaller, at £9,000, versus the adult ISA allowance of £20,000.

In terms of junior ISAs that are worth more than £100,000, there are 1,910 kids with pots of that size. This is more than triple the number recorded a year previously, when there were just 540 young investors with an account running into six figures.

Rob Burgeman, investment manager at RBC Brewin Dolphin, comments: “Junior ISA wealth is booming as more and more families take steps to help the next generation navigate a world of costly tuition fees and ballooning house prices.

“The annual £9,000 JISA allowance is less than half of its adult counterpart, and for that reason very few people ever imagined that there might be school children sitting on pots of £750,000 or more.”

How to build a giant junior ISA 

While the junior ISA only launched in 2011, parents were also allowed to transfer in any savings from its predecessor the child trust fund (CTF).

The biggest junior ISAs revealed in the HMRC figures are assumed to incorporate both CTF and junior ISA contributions made over a 17-year period beginning when the CTF was launched in 2005.

According to RBC Brewin Dolphin, building a war-chest of £761,100 would have required “extraordinary, annualised returns of just under 32% to turn total contributions of £63,436 into £761,100 over this time frame”. 

Total gains would have amounted to a staggering £697,667.

“This kind of turbo-charged growth simply can’t be generated through patient cash saving,” says Burgeman.

“The lesson to be learned is that the stocks and shares junior ISA has rewarded investors with far better returns over the long term than the cash junior ISA. In fact, over the same time period, the cash junior ISA could have grown to approximately £66,000.”

Investing nearly always generates bigger returns over the long term compared to saving money in a bank account. So, if you're saving into a junior ISA for a baby or toddler, consider using a stocks and shares account to accelerate the growth. 

The theory is that any bumps in the stock market should be smoothed out by the child celebrates their 18th birthday.

However, if you are opening a junior ISA for an older child, say, aged 13 or 14, there are only a few years to go until they reach 18, in which case a cash junior ISA could be more suitable.

What about a more modest junior ISA? 

The figures also revealed that 16,420 children have a junior ISA worth £50,000 or more. A year earlier, the number was just 8,130.

A pot of £50,000 is much more manageable to build. For example, a family could contribute about £150 a month from birth, and with a 5% annual return after fees, the account could be worth £50,000 by the child’s 18th birthday.

Increase the contribution to £300 a month, and the junior ISA holder will be looking at a windfall of around £100,000.

“Not every family will have the means to amass £500,000 by the time their children head off to university,” notes Burgeman, “but a more modest pot of £50-£100,000 will certainly be within the reach of many. Start early and you are more likely to reap the rewards.”

A £50,000 pot could potentially help an undergraduate complete their degree without taking on debt, or go towards a first-time buyer’s deposit.

Smaller amounts could be used for a gap year backpacking, or to buy a first car. Teenagers can also choose to roll their junior ISA into an adult ISA and carry on saving or investing.

How do junior ISAs work?

Junior ISAs are tax-free savings accounts available to children under the age of 18. There’s a cash version, and a stock and shares version.

While a parent or guardian has to open the account, anyone (such as grandparents, aunts and uncles, and friends) can contribute to it. A maximum of £9,000 can be paid in each tax year.

The savings cannot be touched until the child turns 18, at which point they can spend or save the cash as they please. The money can either be withdrawn by the holder or transferred into an adult ISA.

The vast majority of junior ISAs are worth less than £10,000: according to HMRC’s figures, around 1.6 million children are sitting on pots less than £10,000.

How else can I save for my child? 

Some parents worry that their child may spend the money recklessly at age 18 rather than using it in a more responsible way.

For those parents who want more of a say in how the money is spent, another tax-efficient method of passing wealth to the next generation is the use of a trust.

A trust allows donors to give away assets indirectly. Typically, a trust is held and managed by a third party known as a trustee.

According to RBC Brewin Dolphin, grandparents will often set aside money for grandchildren with the parents as trustees. Money is typically released when the grandchildren are mature enough to make prudent financial decisions. Though this is at the discretion of the trustees and there is no obligation to wait until the child turns 18 or 21.

Burgeman comments: “There are many types of trust but a discretionary trust is perhaps the perfect vehicle for families to pass wealth on in a tax-efficient manner at a time of their choosing.

“Unlike the junior ISA, children and grandchildren don’t have an absolute entitlement to the funds even when they reach the age of 18.”

Another option for parents and grandparents looking to invest in a child’s future is the use of pensions.

Parents or grandparents can contribute to a junior pension, usually up to £2,880 per tax year. Contributions benefit from 20% income tax relief, which boosts that £2,880 to £3,600.

We have more tips and ideas in our guide: How to make your child a tax-free millionaire by age 37.

The number of ISA millionaires is on the rise as investors benefit from time in the stock market.

Data from Hargreaves Lansdown (HL) shows the investment platform has 1,160 ISA millionaires as of May 2024, up from 836 in March.

Other investment platforms including interactive investor and AJ Bell have also reported an increase in stocks and shares ISA millionaires.

Investment platform interactive investor said it had 1,331 ISA millionaires as of June 2024, up from 1,001 in January.

While many HL investors are opting for UK equities, one of the keys to their financial success is building a globally-diversified portfolio of funds and shares.

Additionally, keeping assets in an ISA wrapper is a great way to build wealth as any returns from the best stocks and top funds are tax-free.

Keeping your tax liability down is especially important amid frozen tax thresholds and falling capital gains allowances.

We reveal where to invest if you want to become an ISA millionaire.

Where are ISA millionaires investing?

Hargreaves Lansdown says the average age of its ISA millionaires is 74 but there is no magic formula or fund that they have put money into.

Its platform data shows 44.7% of its ISA millionaires have invested in UK equities and 45.8% in global, while 8.5% have backed the US and 1% put money into gilts.

Among its other ISA clients, 38.5% have money in UK stocks, 51.5% globally, 9.5% in the US and 0.6% in gilts.

"HL ISA millionaires have most of their money invested in equities, but within this they are well diversified globally," says Victoria Hasler, head of fund research at Hargreaves Lansdown.

"They tend to have a higher proportion invested in the UK than non-millionaires. Non-millionaires prefer global and US equities."

The Artemis Income fund is the most popular UK fund among ISA millionaires, returning 89.42% over the 10 years to the end of May 2024, which is more than 10% ahead of the FTSE All Share Index.

Another firm favourite with HL ISA millionaires is the Fidelity Special Situations fund, up 98.04% over the 10 years to the end of May – more than 20% ahead of the benchmark.

There is also plenty of overlap with non-ISA millionaires when it comes to funds to invest in, with both favouring Artemis Income as well as Fundsmith Equity and Lindsell Train Global Equity.

The main difference appears to be how long they have invested for.

“Sadly, there is no quick fix to becoming an ISA millionaire,” says Hasler.

“The main difference between the millionaires and non-millionaires is their age.

“The average age of an HL ISA millionaire is 74, compared to the average age of regular stocks and Shares ISA investors of 51. It’s that old chestnut of time in the market again.”

How to become an ISA millionaire

Investing is a long-term game so don’t expect to get rich quick with an ISA.

Performance can be volatile but by staying invested you benefit from the power of compounding.

If you can invest the full £20,000 annual ISA allowance each tax year and get a 5% return before fees, you could hit the million-pound mark in 25 years with a pot worth £1,002,269.08.

An annual return of 7% could get you to the million-pound target within 22 years, while a more conservative 3% would take 31 years.

“Starting your ISA investing early is a key component to joining the ISA millionaire club,” adds Hasler.

“Other important steps to getting the best returns and seeing that money grow are using your ISA allowance every year, investing wisely and regularly, then leaving the money there."

ISA investors have been given a boost after HMRC confirmed that new regulations will allow fractional shares to be used in the stocks and shares tax wrapper.

Officials from the Treasury, Financial Conduct Authority and HMRC had been working on plans to let investors put fractional shares in their ISA since the end of 2023, but progress was then halted by the general election. 

Today (23 October), HMRC said that regulation had been laid before parliament on 14 October to allow "certain fractional interests" to be bought in a stocks and shares ISA, junior ISA and child trust fund (CTF). The rules will take effect from 4 November 2024.

An HMRC spokesperson said: “The government has committed to changing the ISA rules to allow certain fractional shares. 

“Taking a pragmatic approach, we will not raise an assessment on managers or investors for fractional shares acquired before these changes are made.”

This means that in theory the ban on fractional shares has already been lifted, in advance of the 4 November date. Some ISA providers have been offering the investment to customers since HMRC announced that it would allow it.

What are fractional shares?

Fractional shares have become popular among influencers and are used on newer trading platforms and apps such as Freetrade, eToro and InvestEngine. They let investors buy a more affordable portion of a stock rather than the whole thing.

Fractional shares break up a stock to let investors buy a portion of one rather than paying the full share price. 

This means any returns are equivalent to how much they have invested.

They are popular in the US where share prices are particularly high and brokers argue that it lowers the barriers to entry for retail investors. For example, a single share in Netflix costs $764, while a share in Apple costs $234.

Fractional shares have become more popular since the emergence of trading apps that let you buy and sell shares from your smartphone. 

This caused an issue with HMRC last year as it warned that ISA regulations don’t cover fractional shares despite some investment platforms letting users put them in the tax wrapper. The Treasury announced changes to this policy in the 2023 Autumn Statement and later confirmed in the 2024 Spring Budget document that it was working on this with the Financial Conduct Authority (FCA) and HMRC.

So, I can hold fractional shares in my ISA?

HMRC has announced that "fractional interests of a whole share" are eligible to be held in a stocks and shares ISA, junior ISA, Lifetime ISA and child trust fund.

Certain conditions must be met, such as:

• The relevant whole share, including shares in an investment trust and shares in a fund, must be a qualifying investment for the purposes of the ISA regulations
• The relevant whole share is either: officially listed on a recognised stock exchange, or admitted to trading on a recognised stock exchange in the UK or the European Economic Area (EEA)
• The whole share is held in your name or the name of your nominee — you cannot delegate below the level of nominee
• The investor has beneficial ownership of the fractional interest
• Transfers or withdrawals of fractional interests are actioned within 30 days

For fractional shares, the general conditions regarding annual general meetings (AGMs) and voting rights do not apply. However, HMRC says that if an investor holds multiple fractional interests amounting to a relevant whole share, then the investor rights relating to a whole share will apply. There is more information in HMRC's guidance.

Should I invest in fractional shares?

Fractional shares can be a useful way to gain access to a company share that might otherwise seem too expensive.

Viktor Nebehaj, chief executive of Freetrade, comments: "Fractional shares enable investors to build a diversified portfolio and access a wider range of investments. We have always maintained that fractional shares meet the criteria to qualify to be held in an ISA."

However, there can be risks involved. Myron Jobson, senior personal finance analyst at Interactive Investor, tells MoneyWeek: “While fractional shares make it easier for modest investors to access expensive stocks, there’s a significant risk that they might focus too much on trading these small portions rather than concentrating on building a diversified portfolio.

“It is also worth noting that fractional shares are not transferrable, so you may need to sell these should you wish to move providers, which could occur a trading cost."

Another potential downside is that you often have limited voting rights. "Many companies grant voting rights only to holders of whole shares, meaning investors in fractional shares may have little to no say in corporate decisions. This can diminish the influence of smaller investors over the companies in which they are part owners," notes Jobson.

Parents may need to contribute as much as £14,000 a year to help their children with university living costs.  That’s according to a new report from the Higher Education Policy Institute (HEPI) and TechnologyOne.

Under the current UK education system, parents are expected to provide financial support for their children at university. The report found that in order to do this it could cost parents as much as £13,865 in England (£6,482 for Welsh students, £10,232 for Scottish students, and for a Northern Irish student, it is £13,548). This estimate is based on the cost of a “minimum basket of goods and services” and assumes that the student gets a minimum maintenance grant for their living costs. 

With inflation, rising mortgage rates, energy bills and soaring private school fees putting pressure on households, parents have to shoulder the added burden of providing for their children’s university costs. 

Meanwhile, for students, the challenges are mounting, balancing higher education with a social life, while managing bills and working part-time adds another layer of difficulty. 

We look at what challenges parents are facing to provide their children with good quality education despite the hefty price tag. 

Burden of university living costs

According to the HEPI report, students in private rented accommodations need an average of £366 a week for a decent standard of living. Annual costs are estimated at £21,774 for students based in London, and£18,632 outside the capital. 

Currently, the government maintenance allowance only provides students with up to 65% cost coverage – leaving a gap of at least 35% of the costs. As a result students may have to find work to cover their living costs or seek handouts from their parents. 

But to cover those living costs students would need to work between 14-23 hours, which is much higher than most universities recommend – a maximum of 15 hours per week during term time. 

We’ve looked at how much parents may have to contribute to their children’s university living costs and the number of hours a student may have to work in paid employment, at minimum wage, to make ends meet without parental support. 

Josh Freeman, policy manager at HEPI who authored the research, revealed to MoneyWeek how these obstacles hurt parents the most. He said, “It is very challenging for families [...] – with students in England who get the minimum maintenance support, for example, nearly £14,000 short.

“All of this is made worse because the government never tells parents how much they need to contribute. We’ve heard from students and parents that this can cause friction. The government should raise the level of maintenance support, raise the threshold for parental contributions and be honest to parents about how much they should give, so all students can reasonably meet their costs while studying.”

Ways to invest in your children’s future

If you don’t want your child to enter the professional world with mounts of debt, you’ll need to start saving early to cover college costs. 

• Consider setting up a junior ISA, which is a tax-efficient way of saving for your child. You can stash away up to £9,000 a year and shield your gains from the taxman.
• Look at child bank accounts. It’s a way of boosting your child’s financial knowledge from an early age. Plus, it will let your kid use their personal allowance of £12,570 and they also qualify for another £5,000 in savings before having to pay any tax.
• Another way of getting a headstart on your child’s future is by paying into a child’s pension or set up a stocks and shares ISA to save money while paying less tax. 

And if you want to make your money work harder for you, in general, head to our best savings accounts guide and best cash ISAs guide to find the best rates for your cash.

Interactive investor, the UK’s second largest investment platform, has launched a managed ISA service to help investors who are just getting started. If you are keen to open a stocks and shares ISA but don’t know what to include in it, a managed portfolio could be a good solution.

Interactive investor's managed ISA allows you to choose from ten different ready-made portfolios. The investment platform says this service will bring a “whole new dimension of simplicity, convenience, and value to the UK investing landscape”. 

Interactive investor isn’t the only platform to offer a managed ISA product, though. The likes of Hargreaves Lansdown, Vanguard, AJ Bell and Wealthify all offer something similar. 

We look at how interactive investor’s new product holds up in terms of fees, investment choice and service. Plus, is a ready-made ISA a good fit for you, or would you be better off investing your £20,000 tax-free allowance elsewhere?

How does interactive investor’s ready-made ISA work? 

Interactive investor’s new ISA, known as a managed ISA, helps clients get started on their investment journey by matching them with a ready-made portfolio. This is then handed over to investment experts to manage.

For many, a key barrier to investing is a lack of knowledge or confidence. That’s where ready-made, expert-managed products like this one can help. They give first-timers access to the same wealth-building opportunities as more seasoned investors. 

But how does interactive investor’s ready-made ISA work?

Before opening a managed ISA with interactive investor, clients will be required to answer a series of questions. These will address how much they want to invest, and the level of risk they are willing to take. 

Once clients have answered these questions, interactive investor presents them with a portfolio recommendation that they can review. Once they are happy, they can open the account. Investment experts then manage the investments from there. 

Investors can select from five different levels of risk, and two different investment styles (index investing and sustainable investing). There are therefore 10 portfolios in total. 

The index investment style “aims to keep costs low by not making frequent changes to the investments held”, interactive investor explains. It primarily invests in passive funds which track a benchmark. 

The sustainable investment style also invests in passive funds predominantly, but combines them with funds that integrate environmental, social and governance considerations. 

“We are always looking to do more for investors, and our new Managed ISA will be a game-changer for the many who want some support in choosing and managing their investments, or perhaps just want that extra level of convenience,” says Richard Wilson, chief executive at interactive investor.

How does interactive investor’s ISA compare to others on fees? 

There are lots of things to consider when picking an investment platform for your ISA, but fees are one of the main things you should look at. High fees can erode your investment returns over time. 

The below table looks at managed ISA products from five different providers. It compares the fees they charge on a £20,000 investment. 

Interactive investor’s flat fee structure means it is competitively priced on an investment of this size, offering the cheapest deal of the group. 

Investment of £20,000

If you have less to invest, however, another provider might prove cheaper. We ran the figures on an investment of £10,000. In this scenario, Vanguard and Wealthify both charge lower fees. 

Investment of £10,000

Of course, you can continue to top up your investment over time. ISA rules allow you to stash away £20,000 each tax year. 

So, even if you don’t have £20,000 to invest initially, it is possible that you will be able to build your account balance up to this threshold within a few years – at which point a flat fee structure could be more beneficial. What’s more, hopefully your pot will grow as you build investment returns. 

This is something to bear in mind if you don’t want to end up having to switch your provider further down the line. Switching can mean selling your investments at an inopportune time, which can dampen investment returns.

Does interactive investor offer a similar service to other managed ISAs?

Interactive investor’s managed ISA service works in a similar way to others on the market. For example, most start with a series of questions to find out how you feel about risk. 

Most providers also give you some degree of choice in terms of the investment style you want to follow. For example, would you like to integrate sustainability criteria into your portfolio?

Once you have chosen your portfolio, most providers then manage it on your behalf. Let’s look at Vanguard, for example. This provider promises to “monitor your investments regularly and make changes to keep you in the right level of risk”. 

One provider that takes a slightly different approach is AJ Bell with its starter portfolios. These are more of a halfway house between a fully-managed ISA and a DIY account. 

AJ Bell clients can choose from four different portfolios – “cautious”, “balanced”, “adventurous” and “income”. Once clients have selected one, they can adjust the asset allocation and add other funds from the provider’s “favourite funds” list. 

Once the starter portfolio is set up, the AJ Bell client is responsible for managing it themself. 

If interactive investor clients want to enjoy the best of both worlds, combining managed ISA investments with more of a DIY approach, this is also an option. The investment platform allows them to do this at no extra cost, within the same flat subscription fee.

Is a managed ISA right for me?

If you are new to investing or don’t have time to research and manage your investments yourself, then a managed ISA could be a good idea. 

It doesn’t offer the same level of flexibility as a DIY account, though. As such, you might prefer a regular stocks and shares ISA if you already have a good idea about what funds or assets you would like to hold. 

If you opt for the DIY approach, bear in mind that you will also need to set aside time to manage your investments. This will include rebalancing your portfolio to ensure you maintain a decent level of diversification and the right amount of risk. 

Of course, stocks and shares ISAs aren’t the only option on the market. You could also consider a cash ISA if you need your wealth to remain liquid. Likewise, you might prefer a cash ISA if you aren’t willing or able to take on any investment risk. 

Cash ISAs have become increasingly attractive in the last couple of years, thanks to higher interest rates. The best cash ISAs are currently offering savings rates north of 5%. 

However, remember that stocks and shares almost always outperform cash over the long run. What’s more, interest rates have now peaked and the best savings deals are already starting to be pulled. 

Inflation is another important consideration, as it can erode the purchasing power of your money. If interest rates fall below inflation at some point in the future, then you will actually be losing money in real terms. 

Cash was offering negative real returns for over a decade in the aftermath of the global financial crisis. Real cash returns have only turned positive in recent months, as inflation has been slowing but interest rates remain high. 

If you have an investment horizon of three to five years or more, your money is usually better off in the stock market. But you should always keep some cash tucked away in a rainy day fund for emergencies. It is usually a good idea to build enough of a cash buffer to cover six months’ worth of expenses. 

The new tax year brings a fresh £20,000 allowance that investors can put into an ISA over the next 12 months. But rather than waiting, there are benefits to being an early bird ISA investor and starting now.

Analysis shows that early bird ISA investors who make use of their ISA allowance from the start of the tax year tend to do better than those who invest at the last minute.

Research by Hargreaves Lansdown shows if you had invested the full ISA allowance in the Legal & General International Index fund through a stocks and shares ISA on the first day of the tax year for the past decade, your portfolio would have grown to £360,500. Someone who left it to the last day of the tax year would have £322,500.

“ISA early birds get the returns,” says Sarah Coles, senior personal finance analyst at Hargreaves Lansdown. “The earlier you use your ISA allowance in the tax year, the better, because your investments have longer to grow, and are protected from tax straight away.”

This trend even works with smaller contributions over longer periods. Analysis by AJ Bell – based on an investment into the average global equity fund yielding 4% - found that those who put £5,000 into an ISA at the beginning of each tax year since 1999 instead of at the end would now be more than £19,000 better off, despite saving precisely the same amount.

“The statistics clearly favour early bird ISA investing over last minute ISA investing,” says Laith Khalaf, head of investment analysis at AJ Bell. “That extra year of investment, when compounded over the years, makes an awful lot of difference. It equates to almost four additional years of contributions.”

The benefits of early bird ISA investing

AJ Bell research shows that global funds returned 17.6% in the 12 months since 6 April 2023. That means a £20,000 ISA investment into a global fund made by an early bird at the beginning of the 2023/2024 tax year was already worth £23,520 by the time last minute ISA investors were arriving at the party.

AJ Bell’s analysis found that if you started contributing £5,000 in the 1999/2000 tax year, your pot could be worth £401,643 now if the money was added at the start of the tax year compared with £382,385 if put in at the end.

Early bird ISA investors in April 2008 would have had to watch their investment plummet by 23% over 12 months after the financial crisis, adds Khalaf. But they would still have been £13,585 ahead of comparable last minute ISA investors.

“Early birds might not always get this lucky,” adds Khalaf. “But even if you happen to invest at a dreadful time, in the long term you can still expect to come up smelling of roses if you put money to work in the market sooner rather than later.”

There are also advantages to acting earlier due reductions in other tax allowances for the 2024/25 tax year.

“The early bird tax advantage could be especially valuable this year seeing as the dividend allowance is being cut to £500,” adds Khalaf. “If you’re already using the £500 allowance elsewhere, a £20,000 early bird contribution invested in a portfolio yielding 4% would save a higher rate taxpayer £270 in dividend tax compared to a last minute ISA investor holding the same portfolio outside the tax shelter until the end of the year.

“Of course, many people leave their ISA contribution to the end of the tax year as they don’t have the money available right away or are waiting until the last minute to see how much they can afford to stash in the tax shelter.

"It still makes sense in these circumstances to use the tax shelter as soon as possible, because when the new tax year rolls around, the old allowance is gone for good.”

Cash savers have enjoyed rising interest rates over the past two years, with savings rates hitting a 15-year high.

This has encouraged record amounts of money to go into cash ISAs. Analysis by the Bank of England shows net inflows of £12.3 billion went into cash ISAs in April 2024, the highest inflow since 1999. This was followed by a record month of net inflows for May at £4.2 billion, the highest May figure on record.

But while the returns on cash ISAs and savings accounts have increased, they have been no match for stocks and shares ISAs investing in UK or global equities.

This is the finding of recent analysis by investment platform AJ Bell on behalf of MoneyWeek. This reveals that while the average cash ISA paid 2.7% last year, a stocks and shares ISA investing in global equities returned 12.7%. Meanwhile, an ISA invested in a UK equity fund returned 7.4% on average.

When inflation is taken into account, cash ISA customers were sitting on a loss, with a real return of -1.2%.

“Cash rates are much better than they were, but despite rising interest rates the average cash ISA has still returned much less than the stock market over the last year, and has actually gone backwards once inflation is factored in,” comments Laith Khalaf, AJ Bell head of investment analysis.

Over longer periods, the gap between cash returns and investment returns becomes much bigger. 

Over five years to the end of 2023, the average cash ISA returned 5.5%. But a stocks and shares ISA holding the average global equity fund grew by 65.7%. An ISA holding the average UK equity fund returned 31.6%. 

Over 20 years, the average cash ISA returned 53.4% to savers, while an investor in the average global equity fund would be sitting on a massive 395.8% return. Someone holding a typical UK equity fund would have a 257% return.

How have these figures been calculated?

We asked AJ Bell to crunch some figures showing how a typical cash ISA would have performed against the average stocks and shares ISA.

We used the average cash ISA as recorded by the Bank of England. Of course, some savers would have found a higher-paying cash ISA than 2.7%, the average rate for 2023. According to our best-buy tables, the top-paying easy-access cash ISA currently pays 5.2%. 

But, some cash ISA customers would have had a lower rate than 2.7%, especially if they hadn’t looked at their account for a while and switched to take advantage of a better deal.

In terms of stocks and shares ISAs, AJ Bell looked at global equity funds and UK equity funds, as it said “these are by far the most popular two sectors held by UK retail investors”.

How cash ISAs and stocks and shares ISAs compare

While most of us know that investments generally perform better than cash over long timeframes, it’s surprising that cash ISAs underperformed last year given the backdrop of rising interest rates. 

Sources: AJ Bell, Bank of England, ONS, FE total return data to 31 December 2023.

It’s worth noting that investors who chose to focus on one region or sector may have had a different experience last year, and may be sitting on some painful losses. 

This would have been the case for someone who invested solely in the China/Greater China fund sector. According to Moneyfacts, this was the worst-performing stocks & shares ISA fund sector last year, falling by more than 30%. 

The commodities and natural resources sector also fared badly, falling by almost 13%.

How inflation erodes returns 

Inflation may be coming down from its double-digit peak - it was 2.0% in the 12 months to May - but it can still erode returns.

“If you hold large sums of cash for long periods you open yourself up to the risk of inflation eroding your spending power, and falling behind those who invest in the stock market. The stock market has ups and downs so you need to be willing to ride out the rough with the smooth, but the quid pro quo is that you are likely to beat cash and inflation in the long run,” says Khalaf. 

He adds: “Data from Barclays going back to 1899 shows that over a 10-year period UK shares have beaten cash over 90% of the time. Moreover, cash produced negative real returns in six of the eleven decades between 1912 and 2022.”

What’s best for me: cash ISA or stocks and shares ISA? 

While our analysis shows that you could have grown your money much more with a stocks and shares ISA over different time periods, the truth is you need to be comfortable with the risks of investing, and also consider your goals and time frame. 

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the wealth manager, says: “When it comes to choosing between a cash ISA and a stocks and shares ISA, deciding where funds should be placed should be guided by the time horizon and when you need the money rather than how the markets or savings rates are performing at a particular point in time.”

Money that is needed in six months or 12 months’ time for a short-term savings goal, such as a holiday, wedding, or big-ticket purchase, would be better placed in an easy-access cash ISA to ensure you can withdraw it quickly when needed.  

“But funds not needed for five years or more - whether to pay for retirement, a child’s university costs or a deposit on a first home - can benefit from the compounding effect that comes with investing money over the long term,” says Haine.

She adds that with interest rate cuts expected this year, savings rates are likely to retreat in the coming months, and so “hunting out the best [interest rate] for those with short-term savings goals will remain key, while those with long-term goals should stick with a stocks and shares ISA”.

You can choose both types of ISAs, dividing the £20,000 tax-free annual allowance as you wish. For example, you could pay in £5,000 to a cash ISA and contribute £15,000 to a stocks and shares version.

Don’t forget to check your investment holdings - or your interest rate if you have a cash ISA - to make sure it’s competitive. 

The UK now boasts 4,850 ISA millionaires, according to the latest data from HM Revenue & Customs (HMRC).

These ISA savers are sitting on pots worth more than £1 million, as of April 2022, according to a freedom of information (FOI) request by smart money app Plum.

The average ISA millionaire pot is worth £1.35 million, with these savers likely to have their money in stocks and shares.

The number of ISA millionaires has tripled over the past two years, from 1,480 in April 2020, according to the HMRC figures. This is around 10 times the 450 ISA millionaires recorded in 2016, and a long way since 2003 when Lord Lee of Trafford became one of the first ISA millionaires.

Even more impressively, the top 25 ISA investors are sitting on pots averaging an eye-watering £8,880,000.

ISAs have the advantage of being ring-fenced from the taxman. Investors can pay in up to £20,000 each tax year across cash ISAs, stocks and shares ISAs, lifetime ISAs, and innovative finance ISAs.

Rajan Lakhani from Plum comments: “ISA millionaire wealth continues to grow, even as other savings and investment products lose a little of their shine following recent tax changes.

“A large part of the ISA’s appeal is the flexibility and liquidity it offers investors. In simple terms, you can crystallise your wealth whenever you choose and regardless of age, unlike, for example, pension holdings or buy-to-let properties."

Last month, the chancellor hiked the capital gains tax rates in her Autumn Budget. Basic-rate taxpayers now pay 18% (up from 10%) on the sale of shares and funds that aren't held in an ISA or pension, while the rate for higher earners has increased from 20% to 24%.

How to invest like an ISA millionaire 

The news that there are almost 5,000 ISA millionaires will leave some investors wondering how much time, strategy and investment return it takes to hit the million-pound mark.

Lakhani notes: “All ISA millionaires have one thing in common. They built their fortunes through stocks and shares investing and will have made the most of their annual allowances.

"Even in this recent period of elevated interest rates, history shows us that for those putting money aside for the long term who are prepared to embrace a little risk, investing through a stock and shares ISA has provided greater returns."

He adds: “While only a fraction of savers will be able to amass a million pounds in their ISA, investing even small amounts regularly can add up to a significant sum over time. That’s especially the case if you begin your investing journey early."

According to Plum, someone starting from scratch today maxing out the current £20,000 annual allowance into a stocks and shares ISA could reasonably expect to reach millionaires’ row in around 22 years, assuming annualised returns of 7% after fees.

Myron Jobson, senior personal finance analyst at fund supermarket Interactive Investor, says that many of today's ISA millionaires will have started building their nest eggs in personal equity plans (PEPs), the predecessor to ISAs.

The average age of an ISA millionaire on Interactive Investor's platform is 74, compared with an average age of 57 for the overall ISA cohort.

He adds: “This reminds us that long-term wealth creation is about discipline and process. Time in the market, not timing the market and utilising government tax wrappers are a great rule of thumb.”

Why ISAs are so valuable now

ISAs are becoming more valuable for savers and investors due to a raft of tax hikes imposed by the Labour government.

Rachel Reeves's maiden Budget announced an increase to capital gains tax, as well as a stamp duty surcharge for buy-to-let landlords.

Pension pots will also become liable for inheritance tax from April 2027.

Lakhani notes: “While Labour has imposed higher taxes on pension wealth and increased the stamp duty surcharge on landlords buying additional properties, there has been far less tinkering around ISAs, meaning generous rewards with fewer headaches for long-term investors.

“Speculation of a lifetime ISA investment ceiling has so far proved unfounded.”

He also highlights the flexibility of an ISA compared to a pension. For example, while pension investors typically only have the option to withdraw a 25% tax-free lump sum up to a cap of £268,275, and can’t touch their pot until aged 55 (or 57 from 2028), adult ISA investors can draw on their pot whenever they want with no ceiling on tax-free cash.

Early bird catches the worm, is the old adage. And rarely has this been truer than when it comes to investing.

Stock and shares investors who delayed until the end of the tax year to use their ISA allowance would have missed out on a whopping £123,000 each over the past 20 years, according to research by financial advice firm Bowmore Wealth.

UK investors often delay their investments in ISAs until the end of the tax year, however, that wait has cost them dearly over recent decades.

Bowmore analysed an individual investing the full ISA allowance, £20,000, into a stocks and shares ISA each tax year. That means up to £400,000 can be saved over two decades.

Investing in a stocks and shares ISA tracking the MSCI Global Index at the start of each tax year would have built up £1.47 million over 20 years – based on the index’s historical performance between 2005 and 2024 of 11%, excluding fees.

By contrast, someone investing the same amount at the end of each tax year would have accumulated £1.34 million – £123,000 less.

Mark Incledon, chief executive at Bowmore Wealth Group, said: “Investors who delay their contributions could miss out on substantial gains in the long term. Investors should focus on spending time in the market – and avoid trying to time the market.

“If you expect that the stock exchange is typically going to rise over time, then research suggests that you want to invest a lump sum as soon in the year as possible.”

We look at the most popular ISA funds in a separate article.

Benefits of compound growth

One of the main reasons early bird ISA investors do so much better is because investors who delay enjoy less compounding growth – where early gains add on to previous gains and steadily build into significantly larger returns over time.

Many people forget to invest until the ISA deadline – on 5 April – looms, by which point they may have already missed out on months of potential growth.

Incledon said: “By investing early, even modest gains can begin generating strong returns of their own, accelerating long-term wealth growth.

“Those who invest late are much less likely to enjoy strong returns from short-term market growth. By contrast, early and proactive investors take advantage of those months of return, purely because they have more invested.”

Market upticks are often short-lived and very easy to miss if you aren’t already invested. A substantial part of the annual increase in stock markets is often concentrated in just a few days.

However, markets can also experience sharp short-term dips — so while investing early can maximise exposure to growth, some investors may prefer to spread contributions over time to smooth out volatility.

"Missing out on gains when markets rise makes it harder to build a cushion for market downturns,” said Incledon.

“In the end, this should serve as a wake-up call for investors to act early – it pays to get in earlier.”

Cuts to cash ISA

Speculation has been rife in recent months that chancellor Rachel Reeves was planning to slash how much savers could put into their cash ISA, in a bid to get more people investing instead.

The chancellor was expected to announce that the proportion of your £20,000 ISA limit that you can save into a cash ISA will be cut, possibly to as little as £5,000, at her Mansion House speech on 15 July, but that didn’t happen.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The cash ISA allowance is safe – at least for now. It’s great that the government wants to further consult industry – rather than rushing into a change that would be a real blow for savers and may not get more people to invest anyway.”

The fact that there are no changes slated for the cash ISA in the immediate future means there’s no enormous hurry to fully utilise your allowance right now.

However, the ongoing discussion means you may still want to take advantage of your allowance and snap up a cash ISA, a stocks and shares ISA, or a combination of the two, while you know where you stand.

We look at the best cash ISAs in a separate article.

Junior ISAs are a great way to save for children – if you open a JISA as soon as your child is born, they could be hundreds of thousands of pounds better off by the time they gain access to it at age 18.

Only parents can open a junior ISA for a child. But once it’s been opened, parents, relatives and friends can contribute a total of £9,000 into the account each tax year, and any interest and investment gains are tax-free.

Junior ISAs have grown in popularity since launching in 2011. There are two types of junior ISA: cash ISAs and stocks and shares ISAs.

Around 1.37 million junior ISA accounts were subscribed to in 2023/24, the twelfth full financial year since the scheme was launched, up from 1.25 million in 2022/23.

Also in 2023/24, £1.8 billion was subscribed to junior ISAs, around 36.4% of which was in cash. The average subscription that tax year increased to £1,347, an increase of 10.4% on the 2022/23 figure.

Junior stocks and shares ISAs are often a better choice than their cash counterpart, especially if the child is young.

This is because shares almost always beat cash over long time periods. Parents can open a junior ISA for a baby, and the money can’t be withdrawn until the child turns 18 – giving you a lengthy timeframe. So, you should have time for your child’s savings to ride out any market downturns and benefit from upswings, and the gains remain tax-free in the JISA wrapper.

But, it can feel overwhelming trying to work out which junior stocks and shares ISA to open. There are lots of investment platforms to choose from, all with their own pros and cons. Some are particularly cheap, while others may offer more investment choice, or, say, an easy-to-use app or better customer service.

We list the top junior stocks and shares ISA platforms to help you choose a product that is easy to use and should build up a decent nest egg for your child.

Top junior ISA providers for low fees

There are two key things to remember when it comes to investing in a junior ISA – you are probably investing for the long term (more than 10 years) and while returns aren’t guaranteed, fees are a certainty. Over the long term, fees add up. You can reduce the impact of fees eating into your returns by choosing a product with low charges.

The cheapest junior ISA will depend on how you want to use it: how much money are you planning to pay in? Do you want to buy funds or shares, and how often do you want to trade them?

To give a flavour of how the costs stack up, we asked Justin Modray, founder of Candid Financial Advice and Compare Fund Platforms, to crunch the numbers for a £5,000 junior ISA containing five funds. Here’s how the annual costs compare for six low-cost junior ISAs (excluding fees for the underlying funds):

Fidelity and Hargreaves Lansdown are the cheapest in terms of having no annual platform fee (you will need to pay fees on the underlying investments, as you would with most providers). Watch out for fees if buying or selling investments over the phone or by post.

Hargreaves Lansdown previously charged an annual fee for its junior ISA, but slashed it to zero in 2023, in a bid to draw in younger investors.

According to Modray, the key for parents when choosing a junior ISA platform is low platform charges along with decent investment choice. It’s also worth checking there are no fees to move the account elsewhere in future.

For example, Charles Stanley Direct charges £10 per investment to transfer the junior ISA “as is” (compared to liquidating the investments and transferring the account as cash).

Modray tells MoneyWeek: “Using a junior stocks and shares ISA can be an excellent way to invest for your child’s future. Just be careful to select appropriate investments and keep an eye on charges. If you’re unsure where to invest, low-cost index-tracking funds covering mainstream stock markets would be a sensible starting point.”

Award-winning junior ISAs

While fees are important, you also need to be comfortable with other aspects, such as customer service, and ease of use if you're not an expert investor. Review sites and awards are also a good way of judging junior ISAs before you actually open one.

The Good Money Guide Awards, for example, aim to “champion financial services firms that excel in innovation, product, and customer service”. Each year, thousands of financial services’ clients tell the Good Money Guide Awards’ judges what they think to help others make smarter decisions about how to manage their money. The awards also provide financial service providers with valuable feedback to improve their services.

Hargreaves Lansdown won Best Junior ISA at the Good Money Guide Awards 2025. Judges praised it for having no account costs, having recently removed its junior ISA fees, making it now one of the cheapest ways to invest for your children, and for the fact you also get the widest selection of UK and international shares as well as bonds, ETFs, VCTs, gilts and bonds.

Beanstalk and GoHenry, app-based JISA accounts, came as runners up in the Good Money Guide Awards 2025.

Beanstalk is particularly good for other family members to contribute to a child’s junior ISA. Its invite tool lets you invite family and friends and they will be linked to your children’s accounts in their app so they can use all the Beanstalk tools to pay in. You can set permissions so you control what each linked donor sees.

Beanstalk’s junior ISA costs an annual fee of 0.5% of the total investment value, making it one of the lower-cost options. There are no sign-up, transfer, or contribution fees. The funds within the account have an additional management fee of 0.12% to 0.15%. The app is free to download and allows for minimum contributions of £10.

GoHenry, alternatively, comes with a prepaid debit card for your child to use and in-app learning tools, as well as the junior ISA (which they can’t touch until they are 18). You get 30 days free to try the app out, then plan fees start from £3.99 a month.

How much could a junior ISA give my child at age 18?

Children receiving these junior ISAs will be grateful for any head start. But the real secret to building a substantial junior ISA is starting early and setting up regular monthly payments.

If you set up a direct debit to come out of your account and go directly into the junior ISA, you’ll never forget to invest, and you’ll build up a nest egg without really noticing. Regular savings have built some astonishing junior ISA portfolios. More than a third of Hargreaves Lansdown’s JISAs have regular payments going into them every month, for example – and the platform’s largest junior ISA built through regular savings alone is worth an impressive £249,000.

But you don’t need to go large on regular savings, you can start with as little as £25 a month and top up with lump sums when it makes sense for your circumstances. The combination of little and often, combined with one-off payments, can generate some huge results. The biggest Hargreaves Lansdown junior ISA that combined regular monthly payments from day one with lump sum top ups is worth £350,900. That’s enough to buy the average property outright – with plenty left over for the rest of life’s milestones.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Clearly, to reach these stratospheric levels they have contributed significant sums for well over a decade and have taken a higher risk strategy than most people are comfortable with, including single company investments. This isn’t going to suit everyone, and runs a bigger risk of losses, but you don’t need to take higher risks in order to see robust growth – a balanced approach over the long term will enable children to get rich slowly.”

You can use Hargreaves Lansdown’s junior ISA calculator to see how much regular monthly contributions could amount to over time.

What are the main junior ISA rules?

To open a junior ISA on behalf of your child, they must be aged under 18 and living in the UK.

If you’ve set up a junior ISA and want to switch to a competitor – perhaps to reduce the fees, or get a better user experience or investment range – go for it.

Parents are allowed to move their child’s junior ISA to a different provider, just watch out for any exit fees (there could be a charge to transfer a stocks and shares account “in-specie”, in which case consider converting to cash first).

You can also move a child trust fund (CTF) into a junior ISA, which could significantly cut your fees and increase your investment choice, as CTFs are now considered old, legacy products. Note that you cannot have a junior ISA as well as a CTF.

The annual allowance is £9,000, and you can split this across a cash junior ISA and stocks and shares junior ISA. So, you could contribute £2,000 to a cash junior ISA, and still put up to £7,000 into a tax-free stocks and shares account, in a single tax year.

Bear in mind that a child can only hold one cash junior ISA and one stocks and shares junior ISA at any one time.

The £9,000 limit is on top of the £20,000 allowance that adults have for their own ISAs.

The cash inside the junior ISA belongs to the child and cannot be withdrawn until they turn 18, although teenagers can take control of the account from age 16.

Children aged 16 and 17 can also open their own junior ISA.

At age 18, the junior ISA passes automatically to the teenager, meaning they can spend, save or invest it as they please.

An Individual Savings Account (ISA) is a tax-efficient vehicle to grow your savings and/or invest in stocks and shares.

Investors and savers can shield money from the taxman with these types of accounts, and their usage is on the rise.

The number of UK adults adding money into all adult ISAs reached 15 million in 2023/24, up from 12.4 million in the previous tax year, the latest figures from HMRC show. It marks the first time the figure exceeded 15 million in 12 years.

Holding savings in ISAs has been particularly important since 2022, when interest rates started rising rapidly. Higher interest rates have led to bigger returns on savings which increase the likelihood of having to pay income tax.

However, some changes to ISA rules are looming, which could make it difficult for savers to shield their cash from the taxman.

We explain everything you need to know in our ISA guide, including how they work, what sort of investments you can hold in a stocks and shares ISA and how to transfer an ISA.

What are the main types of ISA?

There are four main types of ISA: cash, stocks and shares, innovative finance and Lifetime ISAs (LISAs).

You can open one of these accounts if you’re 18 or older, although you can’t open a LISA if you’ve turned 40.

Help to Buy ISAs fall under the cash ISA category, but since November 2019, it’s not been possible to open a new account. Anyone who opened an account before this date and still has it open can pay into it until November 2029 and has to claim the bonus by November 2030.

You can also open Junior ISAs (JISA) for children aged under 18.

We explain each type of ISA in more detail below.

ISA rules: How ISAs work

ISAs are a tax-efficient way to save or invest. You don’t pay income tax, dividend tax or capital gains tax (CGT) on any of the returns you generate from your ISA holdings: effectively, everything within them is shielded from the taxman.

The amount you can contribute into an ISA is limited to £20,000 per year (across adult ISAs).

That £20,000 allowance can be spread across as many adult ISAs as you want, but you can’t exceed it in total.

For example, you could save £5,000 into a cash ISA, then put £15,000 into a stocks and shares ISA. The annual allowance is just an upper cap on contributions – you don’t have to max it out every year.

Any allowance you don’t use in a given tax year is lost; you can’t carry your allowance over into the next year.

There are also limits within the overall allowance. For example, you can only put up to £4,000 per year into a LISA. If you used the full LISA allowance, you’d only have £16,000 left to put into other types of adult ISAs in that tax year.

From 6 April 2027, savers under 65 will be limited to putting a maximum of £12,000 into a cash ISA per tax year. This still counts towards the overall £20,000 annual ISA allowance. Transfers of funds from stocks and shares ISAs to cash ISAs will also be banned as part of the changes.

A Junior ISA has its own allowance of £9,000 per tax year.

How cash ISAs work

A cash ISA is essentially a savings account where you pay in money and earn interest on your savings. The key difference to a traditional savings account is that interest earned on a cash ISA is tax-free. This means regardless of how much interest you earn in an ISA, you won’t pay any tax on it.

This is different to those holding a standard cash savings account, where income tax is owed on any savings interest which exceeds tax-free allowances, such as the personal savings allowance.

There are several different cash ISAs to choose from:

• An easy-access ISA is a useful home for your emergency savings pot, as these allow you to withdraw money when you need it without incurring a penalty – some may limit how many withdrawals you can make before hitting you with a charge.
• Fixed-term ISAs pay an agreed interest rate over a set period of time, typically one to five years, much like a savings bond. They tend to offer higher rates than easy-access ISAs, but in exchange, you have to leave your money untouched or risk paying a penalty.
• Flexible cash ISAs allow you to take money out and replace it during the same tax year, without that amount being deducted from your ISA allowance. For example, you could pay in £20,000, then withdraw £5,000, and a flexible ISA would allow you to pay the £5,000 back in during the same tax year. Not all cash ISAs offer this “flexible” status, so check with the bank or building society, especially if you plan to use the account as an emergency savings pot where you might need to make withdrawals.

You can currently contribute £20,000 to a cash ISA each tax year, but this would leave you with nothing left out of your annual ISA allowance.

Alternatively, you could decide to split the total – such as by contributing £10,000 to a cash ISA, £6,000 to a stocks and shares ISA, and £4,000 to a LISA.

Before 6 April 2024, you could only open and pay into one cash ISA and one stocks and shares ISA per tax year. Now, you can hold multiple ISA accounts, of the same type, within the same year.

In terms of transferring an ISA, you’re free to move a cash ISA to one that pays a better interest rate or one that better suits your needs without affecting this year's allowance – as long as you complete the correct transfer forms.

For your money to retain the all-important tax-free status, contact the ISA provider you want to move to and fill in the transfer form.

If you simply withdraw the money and then deposit it into an ISA, your money will no longer be in the tax-free wrapper. The value of the funds you move will instead come out of your ISA allowance for that year.

Cash ISA transfers should take no longer than 15 working days, according to the government. Other types, like stocks and shares ISAs, can take around 30 calendar days. You’re also free to move to a different type of ISA, such as from cash to stocks and shares, or say, from innovative finance to cash.

How stocks and shares ISAs work

Stocks and shares ISAs, also known as investment ISAs, allow savers to invest in a broad range of assets. Any investment gains you make will not be subject to capital gains tax, income tax or dividend tax. The only tax you may have to pay is stamp duty when buying shares.

The best way to think of a stocks and shares ISA is an investment account with a tax wrapper around it. Like a general investment account (GIA), you can buy everything from shares to bonds to property in the form of real estate investment trusts (REITs), plus open-ended funds (Oeics) and exchange-traded funds (ETFs).

You can choose ready-made investment portfolios (think Moneybox, Wealthify and J.P. Morgan Investing) for your stocks and shares ISA. These are portfolios put together by professionals and are useful if you’re a beginner and looking to take a hands-off approach to investing.

There are also DIY stocks and shares versions (providers include Hargreaves Lansdown, AJ Bell, Charles Stanley Direct and many others), where you can pick your own funds, bonds and shares.

As with any investment account, ensure you check the fees charged by the ISA provider which can chip away at your returns. There could be an annual fee for a stocks and shares ISA, fees to trade investments, and possibly an exit charge.

To move a stocks and shares ISA, ask your new provider for a transfer form.

How Lifetime ISAs work

Lifetime ISAs are the most generous member of the ISA family, with a government bonus of up to £32,000 on offer, over time. Launched in April 2017, they have the dual aim of helping those under 40 get onto the property ladder or save for retirement.

To open one, you must be aged between 18 and 39. You can contribute up to £4,000 each tax year until you’re 50, and must make your first payment into your account before you’re 40. The money you pay in counts towards your £20,000 ISA limit. You can hold cash or stocks and shares in a Lifetime ISA, or a combination of both.

The best bit about LISAs is you get free cash from the government with each deposit. You’ll get a juicy 25% bonus worth up to £1,000 every tax year, depending on your contribution. For example, if you pay £2,000 into your LISA this tax year, you’ll receive a £500 top-up.

You can only access the money penalty-free at age 60 or over, or to buy your first property up to the value of £450,000. You can also withdraw your cash if you’re terminally ill and have less than 12 months left to live.

If you are using a LISA to buy your first home, you must purchase the property at least 12 months after you’ve made your first payment into the LISA.

While the government bonus is a great incentive to open a LISA, bear in mind that if you use it for anything other than the three above scenarios, you’ll be hit with a 25% withdrawal charge, which means you could end up with less than you put in.

The government is launching a consultation in 2026 on the rollout of a new “simpler” product to help first-time buyers get a home.

The retirement option on the LISA could be scrapped as part of the consultation, according to reports.

How Junior ISAs work

If you have children or grandchildren aged under 18, you can save into a JISA for them.

These can be cash or the stocks and shares variety. The account has to be opened by a parent or guardian, but once it’s set up, anyone can add money to it up to £9,000 per tax year.

As an example, if you have paid £2,000 paid into your child’s cash JISA on 15 April 2025, only £7,000 could be paid into their stocks and shares JISA in the same tax year.

The £9,000 JISA limit is separate to the £20,000 allowance for adult ISAs.

As with adult ISAs, any investment gains or interest earned within a JISA is totally tax-free.

The child cannot access the money until they turn 18. As soon as they reach their 18th birthday, they can spend it – or save or invest it – as they choose. This means alongside the cash you deposit into their account, try and also deposit good financial habits into their brains by teaching them about money.

If your child has a Child Trust Fund (CTF) – those born before January 2011 may have one – consider moving it into a Junior ISA. Simply request a transfer form from the Junior ISA provider. Cash Junior ISAs typically have higher interest rates than CTFs, while stocks and shares Junior ISAs generally have lower fees than the CTF versions.

How Innovative Finance ISAs work

Innovative Finance ISAs (IF ISAs) were introduced in 2016 to allow people to invest some or all of their £20,000 annual allowance in peer-to-peer lending and enjoy tax-free returns.

This involves lending your money directly to businesses and individuals without a middleman, such as a bank, in return for interest. Providers include Triodos Bank and EasyMoney.

They are the least popular ISA, and remain a niche product. In 2023/24, just 10,000 people added money into an IF ISA, according to the latest HMRC data. However, in 2024, the range of investments expanded, with long-term asset funds and open-ended property funds with extended notice periods allowed inside Innovative Finance ISAs.

Crypto ETNs – an ISA-eligible instrument that tracks the price changes of cryptocurrencies – can be held in an IF ISA from the start of the 2026/27 tax year.

These developments could potentially increase the popularity of IF ISAs.

IF ISAs are considered the most risky ISA option. Because each ISA provider tends to specialise in a particular niche – small businesses or property developers, for example – it is difficult to diversify across different sectors.

How Help to Buy ISAs work

It’s no longer possible to open a Help to Buy ISA, as they have been replaced by Lifetime ISAs. However, if you already have one, you can continue paying into it until November 2029.

You can contribute up to £200 each month and the government will then top up your savings by 25% (up to a maximum of £3,000) when you buy your first home. You can claim the bonus until November 2030. The home you buy must be priced at £250,000 or less (£450,000 or less in London), be the only property you own and where you intend to live.

As it stands, LISAs are more flexible as the maximum property price is £450,000 for the whole of the UK, you can use it as a retirement nest egg if you don’t end up buying a home, plus the maximum amount you can add into one each tax year is higher.

Are ISAs subject to inheritance tax?

ISA savings and investments do form part of an estate for inheritance tax (IHT) purposes. That said, married couples and civil partners are allowed to pass their estate to their spouse tax-free when they die.

ISAs can also be passed on and retain their all-important tax-free status.

The additional permitted subscription (APS), also known as the inherited ISA allowance, gives the beneficiary an extra ISA allowance, allowing more tax-efficient savings to be made.

For example, say you have £100,000 in your ISAs. When you die, your husband, wife or civil partner will get a one-off £100,000 ISA allowance, in addition to his or her £20,000 annual ISA allowance.

This allowance can be used by a spouse or civil partner, regardless of whether the money in an ISA is left to them or not.

So even if you decide to leave the money in your ISAs to someone else in your family, your spouse is still entitled to the extra allowance to the value of the assets held in your ISAs.

If that £100,000 of ISA assets was left to a child, your spouse would still be entitled to an increased ISA allowance of £100,000 and could use their own money to fund it.

If you've been contributing to a Junior ISA for your child or grandchild, payments may be subject to inheritance tax if you leave an estate worth more than £325,000. However, rules surrounding 'gifting' will apply. You can gift up to £3,000 each year, without incurring IHT. There’s another gift allowance that allows you to hand out £250 to a person each year. It can't be used on somebody you've already used a gifting allowance on, however.

There will be no IHT to pay if the money was paid into the Junior ISA seven or more years before your death.

We explore this topic further in our guide: Can I shield my ISAs from inheritance tax?

Are ISAs worth it?

ISAs are considered worth it because they shield your interest, capital gains and dividends from tax.

You can also pass on the value of your ISA to a spouse or civil partner tax-efficiently.

However, you should only be opening and adding money into an ISA if you don’t have any debts to pay off or credit card balances to clear.

One major drawback to ISAs is the £20,000 annual allowance, but there is no harm in using this allowance first then putting any additional money into other accounts like a general investment account or standard cash savings account. You can earn some interest on savings without being taxed via the personal savings allowance.

When and why were ISAs introduced?

ISAs were introduced in the UK in 1999, under then-chancellor Gordon Brown. While the annual allowance is now £20,000, it started at £7,000.

ISAs replaced the earlier personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs).

The main reason ISAs were introduced was to encourage those on middle and lower incomes to save their money without being subject to tax.

Last August, the government finally removed the frustrating and illogical restriction that prevented Aim (Alternative Investment Market) stocks from being held in an Isa. This has made stocks on the UK's smaller companies board especially attractive from a tax perspective. In addition to now receiving tax relief on dividends and capital gains when held in an Isa, many continue to be exempt from inheritance tax under the Business Property Relief rules. What's more, Aim stocks will be exempt from stamp duty with effect from April 2014.

Those who prefer more stable, established companies may conclude that this won't benefit them. But that's not necessarily the case. While Aim is mainly for smaller, riskier companies, there are also a number of established firms that have never made the jump to the main board. Online retailer ASOS (Aim: ASC) has long been the most famous example it's large enough to make it into the FTSE 100 had its Aim status not ruled this out. Perhaps the most interesting for conservative investors are a number of stable, cash-generative, dividend-paying businesses, many of which are family-controlled and are on Aim to take advantage of less stringent rules on free float.

Popular choices include flooring specialist James Halstead (Aim: JHD), retailer Majestic Wines (Aim: MJW), soft drinks maker Nichols (Aim: NICL) and pub chain Young's (Aim: YNGA (ordinary) and Aim: YNGN (non-voting)).

See also:

Isas make sense so act quicklyCash Isas: Get a better rate on your savingsFunds Isas: How to pick the best platform for youStocks & shares Isas: It pays to compare brokersAdventurous investing: Spice up your Isa with exotic investmentsSipps: Take control of your pension

See our full Isa coverage here

Investment Isas are technically known as stock and shares Isas, but this name doesn't convey the wide range of assets you can buy. Most investors know you can hold UK and international shares, government and corporate bonds, funds, exchange-traded funds (ETFs), investments trusts and real-estate investment trusts (Reits) in an Isa. This last can be particularly attractive, as Reits unlike regular UK shares pay dividends net of 20% tax, which can be reclaimed by the Isa manager.

However, you can access a number of other asset classes, including some you might never have thought of as investments. The way to invest in most of these is via specialist investment trusts the closed-end structure of these funds makes them suited to unconventional, illiquid assets. Here we'll look at some of the more unusual London-listed funds you might want to consider.

A wide range of options

HgCapital

Third Point Offshore Investors

BlueCrest BlueTrend

Funds that invest in debt are another well-established sector, covering a number of different niches including distressed debt and convertible bonds. One potentially interesting one in the current environment is NB Global Floating Rate Income (LSE: NBLS); this invests in bonds where the interest rate varies according to benchmark interest rates, and so should, in theory, benefit when central banks start to raise rates.

Infrastructure funds have grown in

HICL Infrastructure

3i Infrastructure

Among the more esoteric market niches are a number of reinsurance funds. These essentially insure insurance companies against uncommon but severe events. The fund gets premiums from the insurer but has to pay out of its capital if the insured risk for example an earthquake happens. Investors earn a steady income if nothing happens, but are exposed to large potential losses if a series of natural disasters occurs. The best-known UK-listed fund in this niche is CATCo Reinsurance Opportunities (LSE: CATC).

Elsewhere, the three Doric Nimrod funds (LSE: DNA, DNA2, DN3) are a very specific asset-based investment. They buy aircraft that are leased to Emirates, meaning their main risk is the airline's solvency. Burford Capital (LSE: BUR) and Juridica Investments (LSE: JIL) fund corporate legal cases in return for a share of any awards. And the somewhat uninformatively named Alternative Asset Opportunities (LSE: TLI) invests in US traded life interests in other words, it buys life insurance policies from the original policyholder, continues paying the premiums and receives the insured sum when the policyholder dies.

Not for novices