Savings and Investments

What Exactly is and ISA?

Well you would be correct in thinking the ISA is a sizeable domed temple in India, however, in the UK its more frequently thought of as a tax-efficient saving scheme. The y were introduced in 2008 to replace the then range of tax-efficient plans, PEPs TESSAs etc.

Is there only one type of ISA?

No, the range of ISAs available has grown over the years, becoming nearly as confusing as it was before the ISA was introduced. There are six types of ISA:-

  • The Cash ISA
  • Stocks and Shares ISA
  • Lifetime ISA
  • Innovative Finance ISA
  • Junior ISA

What are the differences?

The Cash ISA

The Cash is what it says on the tin, a home for spare Cash, up to £20,000 pa. Any interest earned is tax-free. Within the umbrella of the cash ISA there are three flavours of ISA;-

  • Instant Cash- you can deposit and withdraw whenever you want, interest is variable. Most like the traditional savings account.
  • Fixed-Rate- You put your lump away for a set period and are guaranteed a set return.
  • Regular -savings- commit to a minimum deposit each month, and you will be rewarded with a fixed interest rate.

Requirements: you need to be over age 18 to have one.

Stocks and Shares ISA

Want to dabble in the markets? The stocks and share ISA allows you to invest up to £20,000, all returns are tax-free, i.e. no capital gains tax or income tax. This comes in two flavours:-

  • Managed- Fund manager manages your account, you pay fees
  • Self-select- Choose your investments, still some expenses to the broker.

Requirements: Have to be 18 or over

Lifetime ISA

Government-backed scheme to encourage saving either for a home or retirement. You can go for Cash or shares with this ISA, the cap for either £4000 pa. The Government tops up the savings/investment by 25% or £1000 pa

Retirement Option 

you have to be over 18and under 39 to take this ISA. You stop paying in at fifty and car reap the rewards at age 60.

House Purchase

Again age limits are 18 and 39, yo need to be first time buyer to benefit from this option.

If you take either of these, presuming you save £4000 pa you have £16,000 of allowance available for other ISAs.

Innovative Finance ISA

The most esoteric of the ISA family, basically a vehicle to hold a peer to peer lending pots. You lend other usually bank rejects set a higher interest rate If the loan is repaid you win. However, its higher risk and you can lose your money. There is a £20,000 limit, and you have to be over 18.

The Junior ISA

The only option for children. Taken out by parents/ guardian for children aged under 18. Up to £9000, a year can be paid into the account. At age eighteen it matures and become an adult ISA in the child’s name


This concludes our introduction to Government-backed savings plans. Other options are available, and since the start of the personal savings allowance they may be more flexible and competitive.