Savers and investors come under huge pressure to act each April as the old tax year ends and the new one begins, but this can lead to rushed decisions – making June often a better month to audit your finances.
Households across the UK paid a record £14 billion into cash ISAs in April, according to Bank of England data – the highest amount since ISAs debuted in April 1999 – as rumours of a cut to the cash ISA allowance seem to have contributed to the surge in saving.
But Nick Perrett, founder and CEO of wealth management platform Prosper, said this stampede could be a red flag for high fees.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues 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
Perrett said: “Vague government messaging drove a wave of emotional, knee-jerk decisions – playing right into the hands of platforms that quietly profit from customer anxiety and inactivity.”
He claimed platforms pump out ‘last chance’ ISA messaging or amplify policy rumours, knowing people will move fast and question less, especially when they’re scared.
“That inertia locks people into underperforming funds or excessive fees. It’s a perfect business model – just not for the customer,” he said.
Perrett launched Prosper after discovering he was losing £2,400 a year in hidden fees on one pension alone.
Savers and investors can lose out to fee structures and friction points – like moving a pension or ISA – he said, especially during periods of policy confusion.
So now the frenzy of April’s ISA season has subsided, it could be a good time to reflect on whether the decisions made were in fact the best for your long-term financial goals.
Perrett recommends using June to do a five point audit of your finances:
1. Calculate the real cost of April's ‘free’ money
ISA platforms often offer cashback and lower fee deals ahead of the end of the tax year in order to get you to open an account or switch to them. But these offers are not always as good as they seem if the fees are already high.
“Take any cashback you received to open an ISA with any provider and multiply it by five. That's the minimum you'll pay back in excess fees over your lifetime. If the maths doesn't work, switch now,” said Perrett.
Cashback schemes during ISA season often feel like wins. A ‘free’ £50 or £100 just for transferring your ISA? Sounds great. But let's break it down:
- Say you transferred to a provider offering £100 cashback, but their platform fee is 0.45% versus 0.15% from a lower-cost competitor.
- On a £20,000 portfolio, that’s an extra £60 in annual fees.
- Over 10 years (assuming no growth or compounding fees), that’s £600 – six times the ‘free’ £100.
Lower fee deals can be a better offer than cashback, but again, it depends on the overall fee you’ll be paying.
Hargreaves Lansdown, for example, offered a lower platform fee of 0.27% reduced from 0.45%.
On a portfolio of £250,000, that's still £675 per year in fees for the rest of your life, by Perrett’s calculations.
That’s £450 cheaper than the £1,125 without the last minute offer (how much you would be paying at the prior rate of 0.45%, before the reduction deal).
But, said Perrett, assuming a business would typically want a x5 return on any marketing offer, Hargreaves will still be banking on you generating them in excess of £2,000 in fees in exchange for their £450 offer, he estimated.
And you could get a cheaper deal elsewhere.
“If you wouldn’t voluntarily pay for the privilege of using a platform, don’t be seduced by the different versions of cashback. They are masking long-term costs and giving them a great return on their marketing spend,” said Perrett.
2. Audit your April panic purchase
Review what you actually bought in the ISA season frenzy. Without marketing noise and countdown timers, does it still align with your long-term goals?
April has urgency everywhere – “it is the "financial Black Friday", said Perrett. Did you throw £10,000 into a tech fund because it was “up 35% last year”? Does this still look like a good idea?
Ask yourself:
- Does that fund align with your time horizon and risk appetite?
- Was it part of a broader plan or just FOMO (fear of missing out)?
“Look at your investment breakdown now. If you’re 70% in high-volatility growth funds but planning to buy a house in three years, that’s a red flag,” said Perrett.
Use this moment to course-correct while there’s no pressure.
3. Make the pension vs ISA decision with actual data
Now you have more clarity on your new tax year situation, decide based on facts whether you are better off investing in your pension for upfront tax relief or an ISA for tax-free income at the end.
Let’s say you’re a 40% taxpayer. You put £5,000 into a pension and get 40% tax relief, which is a £2,000 top-up from the government. That £7,000 total grows, including the £2,000, which also compounds.
The comparison with ISAs is as follows:
- Pension withdrawals are taxed later.
- ISAs use post-tax income but all growth is tax-free.
So for example, let’s assume 5% growth over 20 years:
- Pension: £5,000 + £2,000 = £7,000
This gives a total of £18,530 after 20 years’ growth, and £14,824 after 20% income tax (at the basic rate).
This gives a total of around £13,266 (tax-free) after 20 years’ growth at 5%.
“The takeaway is for higher-rate taxpayers, pensions usually win thanks to tax relief and compounding. For basic-rate or non-taxpayers, ISAs may offer better access and simplicity,” Perrett said.
4. Think 30-year returns, not 30-day rewards
Ask yourself: "Will this decision still look smart in 2054?" June's clarity helps you focus on long-term wealth, not short-term incentives.
Investors should multiply their annual fees by 30 and see if it sounds reasonable. If you have kids and think they might inherit your money, you could even be thinking about 100 years of fees.
“The one thing every investor can control is their costs. Most of our customer research has shown that people don’t know how much of their money they will lose because of what seemed like a small fee amount,” Perrett said.
“But paying an extra 1% of fees every year will likely reduce your investment goals over 30 years by 30% to 40%, due to the compounding cost of fees.”
Imagine you had a pension account with £50,000. If you reduced the fees on that pension by 1% today, say from 1.5% to 0.5%, and then that pension grew 5% per year over 30 years, you would earn an extra £71,000 in cash at the end of those 30 years.
In other words, by choosing not to lower your fees in this scenario you would lose more than 40% of the gains your money should make.
5. Hunt for hidden transfer windows
This last one is an easy one that is often overlooked. Simply call your ISA provider and ask about mid-year transfer options. Many offer low- or no-cost switches in June and July but don't advertise it.
Is property investment still as safe as houses? Why golden era could be over
What Santander’s takeover of TSB means for customers
