Five year cash ISA rule every single saver needs to know about
An expert has shared their advice with UK savers who can maximise their money when using Cash ISAs. Investing Insiders' Antonia Medlicott, an advocate for improved financial education, is advising savers to take advantage of the 'five-year' rule that could lead to a healthy boost in interest earnings for Brits. This comes as savers anticipate falling Cash ISA interest rates, meaning that people who place their savings in an ISA will earn less on it.
Brits are being encouraged to secure their savings now and one way to do that, the expert explains, is to invest the annual £20,000 savings allowance into stocks and shares ISAs instead. She explains these ISAs have a typically superior performance over the long term. 'Only 21% of the adult population use investment ISAs compared to 40% who use a cash ISA,' she revealed. 'Many people avoid investing because they simply don't feel they have the knowledge and education to approach it.'
However, the expert said those who are able to invest for a minimum of five years, adopting a longer-term view, stand to gain a significant amount from doing so.
She commented: 'Historically, those who have put their faith in the markets have enjoyed far greater returns than those who used savings accounts instead.'
Meanwhile, seasoned Conservative peer and former head of personal investing at Legal and General, Baroness Helena Morrissey, says savers have lost out on more than £6.6billion by not taking advantage of stocks and shares ISAs.
Madlicott has urged people to act fast, saying: 'With cash ISAs currently offering up to nearly 5% in interest on deposits and some offering even more with introductory rates, savers can gain peace of mind over the returns they will receive and some great rates.
'However, most of the top-paying accounts offer 'variable' rates, meaning they can go up and down as the Bank of England rate fluctuates. You will generally get easier access to the cash held in these accounts.'
There is plenty of speculation about a potential May reduction in rates by the Bank of England, so Madlicott suggests that savers secure higher rates with fixed-rate accounts or long-term ISAs now, before the opportunity may disappear.
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