Investment in ISAs continues to grow despite low interest rates – is this the right thing to do as inflation ticks up?

(Capital at risk - Past performance is not an indicator of future results. Not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated in property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice. Please note that the parameters contained in this blog are subject to change as our business evolves).

The amount of money in cash ISAs has continued to grow despite persistent low deposit rates, recent HMRC figures show. The total invested in cash ISAs increased 11% from 2018-19 to 2019-20 – from £44bn to £48.7bn.

The popularity of cash ISAs has persisted despite chronic low-interest rates on those accounts, often below the rate of inflation, creating low or even negative real returns in recent years. This problem is likely to worsen as inflation begins to tick upwards as the economy bounces back from lockdown.

For a greater return on investment, investors may want to consider an Innovative Finance ISA (IFISA). While they entail a greater element of risk, easyMoney’s Classic IFISA paid an average of 3.62% interest in 2020. Cash ISAs typically offer annual returns of 1% or less, below the current rate of inflation at 2.1%.

easyMoney’s CEO Andrew de Candole says, “Investors in cash ISAs are losing money as things stand. There are a range of options investors can consider, which may involve more risk but also offer the opportunity for real returns. One such option could be one of our expertly managed IFISAs, which offer the opportunity for your savings pot to grow rather than shrink in real terms.”

Please note we are not allowed to give financial advice, you should always contact an independent financial advisor before you invest.

All the facts and figures presented are accurate at the time of posting.

easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated in property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.

easyMoney is the trading name of E-money Capital Ltd, a company incorporated in England & Wales. Registered office is 5 Fleet Place, London, England, EC4M 7RD (Company No. 04861007). E-money Capital Ltd is authorised and regulated by the Financial Conduct Authority (FCA) #231680.