Why the new combined Isa could mean a much better return on your money
Combining cash and stocks & shares Isas ought to mean that investors will get a better return on cash waiting to be invested.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Twice daily
MoneyWeek
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Four times a week
Look After My Bills
Sign up to our free money-saving newsletter, filled with the latest news and expert advice to help you find the best tips and deals for managing your bills. Start saving today!
There was lots of good news for MoneyWeek readers in the Budget. We were pleased with the new flexibility on pensions, and thrilled by the rise in the Isa allowance and the abolition of the (always slightly strange) wall between cash and stocks & shares Isas.
But this isn't just good news because £15,000 is a really useful amount to be able to save in a tax free wrapper every year. It's good news because it means that those of us who have always opened share Isas but held cash inside them (while waiting for the right time/investment opportunity) might finally get a return on that cash.
Say you have an Isa with Hargreaves Lansdown today. You are doing OK and you have a total of £200,000 in it. £160,000 is invested in various funds but £40,000 is waiting to be invested. You'll be making 0.05% on it.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Worse, under current regulations for stocks & shares Isas you'll be paying 20% tax on the income. So your annual return on the cash will be £16 (£20 in interest, minus £4 in tax). It isn't much, but it is standard stuff and until now there hasn't been much you can do about it no one pays rates any higher on cash held in SIPPs and Isas, and you haven't been able to transfer cash in and out as you like.
However, if everything now works as it looks like it is going to, this is all about to change. If you can transfer your money in and out of cash and shares you might just take that £40,000 and move it into a wrapper at, say, Nationwide where the instant access cash Isa currently pays 1.6%. That would give you a return of £644 (1.6%, no income tax).
It seems to us that even the threat of that happening is likely to get the brokers and fund supermarkets thinking they need to up their rates to a level that, even if it doesn't match that offered by the banks, is at least high enough to stop us bothering to move (moving money around is boring).
Yet another thing to look forward to.
-
MoneyWeek Talks: The funds to choose in 2026Podcast Fidelity's Tom Stevenson reveals his top three funds for 2026 for your ISA or self-invested personal pension
-
Three companies with deep economic moats to buy nowOpinion An economic moat can underpin a company's future returns. Here, Imran Sattar, portfolio manager at Edinburgh Investment Trust, selects three stocks to buy now
-
Our pension system, little-changed since Roman times, needs updatingOpinion The Romans introduced pensions, and we still have a similar system now. But there is one vital difference between Roman times and now that means the system needs updating, says Merryn Somerset Webb.
-
We’re doing well on pensions – but we still need to do betterOpinion Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn Somerset Webb.
-
Older people may own their own home, but the young have better pensionsOpinion UK house prices mean owning a home remains a pipe dream for many young people, but they should have a comfortable retirement, says Merryn Somerset Webb.
-
How to avoid a miserable retirementOpinion The trouble with the UK’s private pension system, says Merryn Somerset Webb, is that it leaves most of us at the mercy of the markets. And the outlook for the markets is miserable.
-
Young investors could bet on NFTs over traditional investmentsOpinion The first batch of child trust funds and Junior Isas are maturing. But young investors could be tempted to bet their proceeds on digital baubles such as NFTs rather than rolling their money over into traditional investments
-
Negative interest rates and the end of free bank accountsOpinion Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK banking system slightly less awful, says Merryn Somerset Webb.
-
Pandemics, politicians and gold-plated pensionsAdvice As more and more people lose their jobs to the pandemic and the lockdowns imposed to deal with it, there’s one bunch of people who won’t have to worry about their future: politicians, with their generous defined-benefits pensions.
-
How the stamp duty holiday is pushing up house pricesOpinion Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb.
