What to do with Cash ISA?

fatherandson

Good evening,

I have 40k in a cash ISA paying a paltry 0.85% interest. I'm starting to investigate how I can improve my returns. The sum represents my rainy day fund for emergencies, so my appetite for risk is moderate. However, I'd also like to grow the fund towards some sort of retirement fund (to supplement my pensons).

My current thinking is to split the fund into a fixed interest isa (Coventry build society 5 year), and a moderate risk investment fund.

I am feeling quite overwhelmed by the information available and would welcome advice or pointers into what to read or what to focus on.

I do have a iWeb stocks and shares ISA as well, where I have tried limited trading in the past

Alexland

Welcome to the forums

Without knowing your age or intended retirement date it's hard to comment but generally we suggest keeping your emergency pot in cash and only investing money that you will not need to access for at least 5 but preferably 7+ years. This is to avoid the possibility of needing to sell your investments while markets are low.

In terms of your S&S ISA then short term trading is generally less than 50/50 likely to yield positive results however if you pick a good long term investment (and you have plenty of choice on iWeb) then you should be able to achieve at least an inflation level of return with some ups and downs along the way. I find the below graph useful.

https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

Alex

Alexland

Have you considered if there are any advantages to using a pension wrapper instead of a S&S ISA?

Do you have access to a workplace pension, are you already making sufficient contributions to get maximum employer matching, would it be tax advantageous to make further contributions? You should be able to access the money soon anyway.

Alex

xylophone

Had you thought of increasing your contributions to your pension?

Have you obtained a new state pension statement?

https://www.gov.uk/check-state-pension

fatherandson

By pension wrapper - do you mean a SIPP? I have looked at them, but was reluctant to tie up my capital (the risk adverse side of me). Should I be reconsidering?

Alexland

A £300k pension is not bad at 50 if you intend to work into your late 60s. With compound growth above inflation and if you can maintain the current contribution rate it should become a sufficient pot for most lifestyle needs. With both school fees and a heafty mortgage that limits the opportunity to be too tax efficient and I can see why you might want to maintain a suitable sized cash emergency pot.

Alex