Cash vs Stocks and Shares ISA?

fcandmp

Hi, I am just starting to look at ISA subscription for 2024/25 and wonder what peoples thoughts are regarding Cash (fixed term) vs Stocks and Shares ISA for the next few years. We have healthy multi-year Stocks and Shares ISA balances built up (we are 64 and 66 accordingly) and a couple of years of Cash ISA on fixed term with Skipton. So, what next? I should add this is primarily for investment income over and above pension income. many thanks

Mark_d

With S&S  your capital growth and dividend income is likely to incur significant tax liabilities outside an ISA it makes a lot of sense to use an ISA.  With cash, the interest earned is unlikely to incur mush in the way of tax liabilities, so there is little value with using ISA allowance for cash.

Additionally you can likely find cash savings accounts that pay higher rates than cash ISAs

dunstonh

Hi, I am just starting to look at ISA subscription for 2024/25 and wonder what peoples thoughts are regarding Cash (fixed term) vs Stocks and Shares ISA for the next few years

There are about 30,000 different investment options you can hold in an ISA.     And a near infinite number of variations.

So, you cannot really answer your post without some context to the investments you would likely hold. 

However, if you look at past performance, you would have only lost against cash in 2022, 2018, 2008, 2003 for most assets  (a wobble over 15/16 but quick recovery meant most people didn't even spot it)

I should add this is primarily for investment income over and above pension income.

Which would make the use of cash, beyond short term float, a high risk option.  So, investing would make sense.

Albermarle

Mark_d said:

With S&S  your capital growth and dividend income is likely to incur significant tax liabilities outside an ISA it makes a lot of sense to use an ISA.  With cash, the interest earned is unlikely to incur mush in the way of tax liabilities, so there is little value with using ISA allowance for cash.

Additionally you can likely find cash savings accounts that pay higher rates than cash ISAs

For many people they only need £20K (ish) in savings before they start to get taxed on interest.( less for a higher rate taxpayer)
So cash ISA's are certainly of interest unless 
1) The savings level are on the lower side
2) You have taxable income below say £15K, as then you have more headroom before paying tax on interest.

Currently the rates for equivalent cash ISA account and non ISA accounts, are not generally not much different. 

fcandmp

dunstonh said:

Hi, I am just starting to look at ISA subscription for 2024/25 and wonder what peoples thoughts are regarding Cash (fixed term) vs Stocks and Shares ISA for the next few years

There are about 30,000 different investment options you can hold in an ISA.     And a near infinite number of variations.

So, you cannot really answer your post without some context to the investments you would likely hold. 

However, if you look at past performance, you would have only lost against cash in 2022, 2018, 2008, 2003 for most assets  (a wobble over 15/16 but quick recovery meant most people didn't even spot it)

I should add this is primarily for investment income over and above pension income.

Which would make the use of cash, beyond short term float, a high risk option.  So, investing would make sense.

I think what prompted my thread was something someone said to me some years back, which was don't take on more risk than you need to. To that end, with interest rates as they are, I can get between 4-5% guaranteed investment return short term (albeit it there is an inflation risk behind this). I am therefore looking to contrast this with the income and underlying asset values of putting more money into the stock market, with world stability being at best uncertain. 

InvesterJones

fcandmp said:

dunstonh said:

Hi, I am just starting to look at ISA subscription for 2024/25 and wonder what peoples thoughts are regarding Cash (fixed term) vs Stocks and Shares ISA for the next few years

There are about 30,000 different investment options you can hold in an ISA.     And a near infinite number of variations.

So, you cannot really answer your post without some context to the investments you would likely hold. 

However, if you look at past performance, you would have only lost against cash in 2022, 2018, 2008, 2003 for most assets  (a wobble over 15/16 but quick recovery meant most people didn't even spot it)

I should add this is primarily for investment income over and above pension income.

Which would make the use of cash, beyond short term float, a high risk option.  So, investing would make sense.

I think what prompted my thread was something someone said to me some years back, which was don't take on more risk than you need to.

It's an excellent approach - define your goals first, then take the appropriate level of risk needed to reach them and no more. So how much more income do you need? If you can get it from guaranteed cash then why take more risk? But if it's not enough, then no amount of stability will cover for the fact it's not returning enough.

Albermarle

with world stability being at best uncertain. 

When was it ever certain ?

Also be aware that global political instability only indirectly affects stock markets. They tend to be more interested in what is happening to the US economy and how many I phones have been sold this month ( as one example).

The American stock market is 31% up in the last 12 months. 

silvercue

I know there are pros and cons to all of these investments, but I would always invest in a S&S ISA over a Cash ISA. 

And considering that Germany and Japan have both hit market ATHs whilst in recession - stocks seem strong and geared up for interest rate drops.  

Hoenir

"Few years"  is normally considered to short a time frame to select investments over cash. Despite the higher returns ultimtely achieved. In the shorter term the value of your investments could actually dip. When they'll return to their former heights is no different to asking how long is piece of string.