Can You Have More than One ISA at the Same Time?
(Capital at risk - Past performance does not guarantee future results)
Today’s blog is about mixing things up: your Individual Savings Account (ISA) portfolio, that is. Have you ever wondered if a combination of ISAs is a good idea, and how it all works? What you can, and can’t do? Which ISA could perform best for you? Here’s your hot-off-the-press guide to ISAs from the team here at easyMoney.
Firstly, a Did You Know?-type fact: According to Moneyfacts, at the time of writing there are 1,057 savings accounts in the UK.
A fairly high number, you may think, but in fact a substantially lower figure than a year ago. And, Moneyfacts tells us that the number of ISA deals has dropped, too; from 405 in February 2020 to 323 just a year later. With interest rates for cash ISAs at an all-time low (hovering about the 1% mark), perhaps this is no major surprise.
For individuals with a cautious attitude to risk, these types of ISAs offer (in our view) disappointingly low returns but easy access. Good “cash in the bank” options for emergency purchases, or for nice things like holidays, maybe. We’ll go into the pluses and minuses later, and in particular in relation to the IFISA offered by easyMoney, for you to make some comparisons..
So, Can you hold more than one ISA, and how many can you have?
The short answer is yes, but you can only open ONE of each type of ISA in each tax year – although you can have several “old” ones with different providers, in essence building up a collection. This means, you can have a cash ISA, a stocks and shares ISA, an Innovative Finance ISA and a Lifetime ISA at the same time.
In addition, you can transfer all or part of a previous year’s ISA monies into a new account in order to get a better interest rate, as well as opening a new account for the current year.
But let’s go back to basics a little here, to put everything in context for you.
Quick History of ISAs
Individual Savings Accounts were launched by the government in 1999 to replace Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs). Every year, investors and savers get an annual ISA allowance, currently set at £20,000 since 2017/18. This means, any interest you earn is completely free from tax.
There are currently 4 main types of ISAs for adults. Here’s a brief description of each, along with the current state of play:
In effect, a regular savings account with tax-free interest[.Up to £85,000, your money is secure, and you’re not going to lose it. Nevertheless, its value may be eroded if the interest you gain is lower than the rate of inflation. And, given that 75% of ISAs care cash products (see Times reference below), where are we now?
In a nutshell, potentially not in a good place. Given that the current inflation rate is 2.1% (https://www.bankofengland.co.uk/monetary-policy/inflation) and the average rate of return for cash ISAs is now at an all-time low median of 0.24% (https://www.thetimes.co.uk/article/50bn-pours-into-cash-isas-but-returns-are-at-rock-bottom-c9j2qwk0q), it doesn’t take a genius to work out that inflation is posing a substantial threat to cash ISA investors.
Here at easyMoney, we’re concerned that these investments earn literally nothing for the saver. However, interest rates may rise as we emerge from lockdown.
Stocks and Shares ISAs
This ISA enables you to invest in a range of funds, bonds and company shares, again using your tax-free allowance. Aimed at investors with a longer-term view, and those happy to take a degree of risk, it goes without saying that the volatile nature of the market could dramatically affect returns. In fact, the Times article referenced above states that the total saved in these types of ISAs dropped 3 per cent from 2019 to April last year.
A Lifetime ISA can only be used for either buying your first home or for paying for your retirement. You will need to be aged between 18 and 39 to qualify. With regard to retirement, you could benefit from a 25% bonus on deposits of up to £4,000 each year. However, you will not be able to access these funds until you reach 60, unless you pay a 25% penalty on your withdrawals.
And don’t forget – you can only invest up to £4,000 a year, leaving you £16,000 to put into another type of ISA.
Introduced in 2016/2017, Innovative Finance Individual Savings Accounts are, in our view, innovative – hence their title. Whilst they hold the name “ISA” they’re not cash savings accounts. Instead, an IFISA enables you to lend money on a peer-to-peer basis inside your £20,000 tax-free “wrapper”.
Any interest you earn from loan repayments will not be taxed by the government. Plus, your interest payments are paid monthly and can either be withdrawn to your bank account, or re-invested.
Read on for some easyMoney good news.
The easyMoney Approach
To be specific, the P2P lending platform from easyMoney focuses on loans backed by UK property. We match up investors with carefully selected individuals and businesses who are actively looking to borrow funds – perhaps for a bridging loan, for property development projects, or a mixture of the two.
The Good News
Importantly, unlike cash ISAs, although there are no guarantees, an IFISA from us could deliver considerably more robust returns than even other IFISA providers – up to 8% in fact. So, with an interest rate as strong as this, your money will definitely NOT be shifting into reverse gear.
Given our expertise in property and our cautious approach to lending, easyMoney has never made a loss on any of its loans. Knowing and understanding our subject matter in depth offers, in our opinion, a safe pair of hands to our investors
There are 4 investment levels (Classic, Premium, Premium Plus and High Net Worth) with investments starting as low as £100 and up to £100,000+.
Get in touch to find out more. Whilst the experience and knowledge that lies behind your future investments with easyMoney is in-depth, becoming a part of the easyMoney family is, well, easy.
Regarding diversification, you can hold an IFISA alongside other ISAs, provided that the total you invest in one year does not go higher than £20,000. Additionally, you can only pay into one IFISA in each tax year, although you can hold several previous year IFISAs at the same time.
Or, you can put the entire amount into one ISA, it’s up to you.
In conclusion, the easyMoney team recommends that you weigh up the pros and cons on the various ISAs available. We’d advise you to have a think about your financial goals, as well as your overall attitude to risk. None of our investors has ever made a loss from our peer-to-peer lending platform but do undertake some research. Also, we must mention that past performance does not guarantee future results.
e-Money Capital Ltd trading as easyMoney is authorised and regulated by the FCA (FRN 231680). Instant access to your money can’t be guaranteed. The property industry is subject to market conditions and therefore your capital is at risk.
Peer-to-Peer Investments are not cash savings accounts so they are not covered by the Financial Services Compensation Scheme (FSCS). Past performance does not guarantee future results. Tax treatment is dependent on individual circumstances and subject to change.