Best funds to add to your ISA or SIPP before the Budget

Investing in an ISA or self-invested personal pension (SIPP) is one of the best ways to shield your investment income and capital gains from the taxman. And with a possible tax raid planned for the 30 October Budget, it makes sense to maximise your annual tax-free allowances, if you can. 

But which funds or stocks are worth adding to your portfolio? With thousands of funds, ETFs and trusts on the market, it’s a tricky question.

Several investment platforms publish best-buy lists which can help you narrow down your search for the right funds – whether you’re researching for an ISA, a SIPP or a different kind of investment account. These are useful tools and can simplify your research process considerably. 

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“Each sector typically has a dedicated team of half a dozen investment managers researching and monitoring the investment options available,” says Jason Hollands, managing director at Bestinvest. 

“Our investment specialists not only meet the fund managers to understand their philosophy and approach, but also carefully assess the type of market environment that might benefit from a certain manager’s style,” he adds.

These are some of the top funds to consider according to Bestinvest’s latest best funds list, published today (2 October). If you are looking at which funds to avoid, you can also peruse the latest spot the dog report.

The best funds to invest in

Best UK equity funds for growth

• Liontrust UK Growth
• Artemis UK Select
• The Mercantile Investment Trust

Best UK equity funds for income

• Temple Bar Investment Trust
• BlackRock UK Income
• Montanaro UK Income

Best targeted absolute return funds

• Personal Assets Trust
• Lazard Rathmore Alternative
• TM Fulcrum Diversified Absolute Return

Best bond funds

• Artemis Corporate Bond
• Invesco Tactical Bond

Best European equity funds

• BlackRock Continental European Income
• Fidelity European Trust
• Liontrust European Dynamic

Best Japanese equity funds

• iShares Japan Equity Index
• JPM Japan

Best Asian and emerging market funds

• Templeton Emerging Markets Investment Trust
• Pacific Assets Trust

Best US equity funds

• Premier Miton US Opportunities
• Loomis Sayles US Equity Leaders
• GQG Partners US Equity

Best global equity funds

• Fidelity Index World
• Brown Advisory Global Leaders
• JP Morgan Global Growth & Income Investment Trust

Ethical and sustainable

• Guinness Sustainable Energy
• Baillie Gifford Responsible Global Equity Income
• Royal London Sustainable Leaders

Real assets

• International Public Partnerships
• 3i Infrastructure

Funds dropped from the best-buy list

The following funds featured on the best-buy list in March 2024, but have since been dropped:

• Janus Henderson Strategic Bond 
• CT Responsible Global Equity 
• Ashmore EM Local Currency Bond 
• Amundi Sandler US Equity 
• CIFC Long/Short Credit 
• JPM Global Macro Sustainable 
• LXI REIT 
• UK Commercial Property

New best-buy funds added

These newcomers have been added to the list since the last edition:

• Liontrust European Dynamic 
• M&G Japan 
• BlackRock Gold & General 
• JPM UK Equity Core 
• SPDR MSCI ACWI ETF 
• Xtrackers S&P 500 Equal Weight ETF 
• Alliance Trust

Should you rush to top up your ISA or SIPP before the Budget?

Prime minister Keir Starmer has warned the upcoming Budget will be “painful” as the government looks for ways to plug a £22bn black hole in the public finances. This has led to speculation that taxes will go up. 

One of the areas of focus has been capital gains tax (CGT). Experts have suggested chancellor Rachel Reeves could look at raising the rate of CGT to bring it in line with income tax. Alternatively, she could consider slashing the capital gains or dividend allowances further to raise money. These have already been cut to £3,000 and £500 respectively in recent years.

Pensions have also been in focus, with some commentators suggesting pension tax relief could be cut for higher earners. Under current rules, savers can contribute up to £60,000 to their pension each year and receive a tax refund at their marginal rate (20%, 40% or 45%). This is a generous allowance and one of the things that makes pension saving so attractive.

“Investors looking to make their portfolios as tax efficient as possible are under pressure like never before in the run up to Labour’s first Budget on October 30,” Hollands says. “While striving to maximise tax-free allowances is something investors typically do at the end of the tax year, many are now spooked at the prospect of major changes to the way savings, pensions and investments are taxed,” he adds.

That said, investors should take the time to carry out thorough research before rushing into buying a fund. Any changes introduced by the government generally go through a period of consultation and are subject to legislative processes before coming into effect. 

What’s more, if you are itching to act before Budget day, you could always top up your stocks and shares ISA or SIPP with cash for now. Once the cash is shielded from the taxman in the ISA or SIPP wrapper, you can take your time choosing how to invest it at leisure.

Key things to consider when researching funds

While a best-buy guide is a useful tool when researching funds, it doesn’t tell you everything you need to know. Before deciding which funds to invest in, DIY investors should think carefully about their objectives and their asset allocation. 

Are you looking to achieve growth or income? How much risk are you willing and able to take? What combination of different assets can help you achieve this?

If you aren’t sure and don’t have much experience with DIY investing, you might benefit from investment advice. A robo-advisor could be a cheaper option than speaking to a person. This is a popular starting point for many DIY investors. 

Once you have your strategy nailed down, that’s where a best-buy guide comes in.