Stocks and Shares ISA Review


Due largely to existing low interest rates, savings vehicles, like money markets, savings, and current accounts, pay you next to nothing (compared to just a few years ago).

Even when these savings are held tax-free in cash individual savings accounts (ISAs), the growth is surprisingly slow, even with some of the best ISA rates.

Aside from seeking out the best cash ISAs, what else can individuals in the UK do to add just a bit more zing to their savings so that they can earn better returns than they do with traditional savings tools?

The answer is a stocks and shares ISA.

In the rest of this review, AdvisoryHQ will show you how you can harness the power of a stocks and shares ISA to supercharge your savings.

We’ll review the various types of investments that you can hold in your account, how you can select the best stocks and shares ISA for you, and we’ll also highlight some products available through nationally renowned banks, building societies, and other financial institutions.

Image source: Pixabay

 



What You Should Know About a Stocks & Shares ISA

Investing in a stocks and shares ISA in the UK is a unique way for UK nationals and residents to leverage a savings and investment tool that could potentially produce high returns on their savings.

How does a stocks and shares ISA work?

The concept of a stocks & shares ISA is no different from buying, owning, and selling stocks and shares outside of an ISA. The only differences are:

  • You are only allowed to save/invest up to your personal ISA allowance – which for 2015 was £15,000 per person while the ISA allowance for 2015/16 is set at £15,240.
  • As long as your investments remain within your stocks & shares ISA, they grow there tax-free, including any dividends or capital appreciation to the value of the shares and stocks held in the account.

The following table provides a snapshot of the differences between a stocks and shares ISA vs. cash ISA.

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Stocks and Shares ISA vs. Cash ISA Comparison

FEATURE

 STOCKS & SHARES ISA

CASH ISA

Ideal for…

UK residents having a 5+ year saving/investment time horizon to capture growth from stock markets.

They are usually good for shorter periods – less than 5 years or where you may need easier access to the money.

Returns…

There is a potential for exceptional returns (higher than a cash ISA), depending on stock market performance.

Your returns are determined by the fixed cash ISA rates advertised or variable rates declared from time-to-time. Usually, these rates revolve around the Bank Of England’s prime rates.

Risks to be aware of …

Even with the best stocks and shares ISA, your initial principal could erode if the stock market plummets, leaving you with less savings than what you initially invested.

While you usually have a guarantee of principal protection, plus fixed or variable rates of interest, your money could still be losing value if the ISA interest rates are less than the rate of inflation.

Volatility…

There could be significant up and down swings in the value of your investments from day to day and even intra-day.

Your savings remain fairly stable and predictable, with interest rates usually compounded daily and paid monthly/annually.

Guarantees…

There are no guarantees of returns or of your principal being protected.

With a cash ISA, your money is protected up to £85,000, with each account you hold in every bank or building society.

Amount of investment…

Your ISA allowance for 2015/16 allows you to invest up to a maximum of £15,240, inclusive of amounts invested in a cash ISA.

For the tax year 2015/16, you can invest up to a maximum of £15,240, inclusive of amounts invested in any stocks & shares ISA.

Investment choices…

Most institutions offer a wide range of investment choices, including individual stocks and shares, gilts, bonds, exchange-traded funds (ETFs), and investment trust units and funds.

There are no choices offered. The only flexibility is in choosing the best ISA rates applicable on a fixed versus variable investment product.

Access to money…

While you can generally get money by selling the investments held in the account, it may take anywhere between 8 and 10 days before the cash is available for withdrawal from your stocks and shares ISA account.

Most variable rate accounts offer “instant” access through ATMs, online or via phone banking. For fixed-term investments, you may be able to cash your investments earlier; however, you may lose interest or have to pay early withdrawal penalties.

In looking at the table above, it is clear that while a stocks and shares ISA offers the best ISA rates of returns and allows your money to grow faster than if held in a cash ISA, they also pose significantly greater risks (compared to cash ISAs) of losing all or a lot of your savings.



Best Stocks & Shares ISA Accounts

Using AdvisoryHQ’s proprietary selection methodology to compare stocks and shares ISA accounts across a wide range of UK banking institutions, we have identified the following list of best stocks and shares ISA accounts.

BANK

ACCOUNT NAME

Santander

Investments ISA

Santander

Fixed Term Investment

Barclays

Investment ISAs

Lloyds Bank

Stocks and Shares ISA

Lloyds Bank

Share Dealing ISA

Nationwide

 Stocks & Shares ISA

Halifax

Self-Select Stocks and Shares ISA

Halifax

Junior Stocks & Shares ISA

Halifax

Managed Growth Fund 2

Halifax

Managed Growth Fund 4

Halifax

Managed Growth Fund 6

 

Click below for a detailed review and comparison of these stocks and shares ISA accounts.

Stocks and Shares ISA Comparison Ranking – Detailed Reviews



FAQs on Stocks and Shares ISAs

1. Can I withdraw my money anytime from a stocks and shares ISA?

Yes, you can! You may sell your shares and withdraw the money from your stocks & shares ISA at any time you wish.

However, be aware that some products will penalise you for selling before a stipulated period, and there may even be “load” fees payable when you redeem your units/shares.

2. How much money can I invest in a stocks & shares ISA?

Your ISA allowance for 2015/16 is £15,240 to be saved in an adult ISA. This total amount includes money put away in both a cash ISA as well as in a stocks & shares ISA. A little-known fact, however, is that kids between the age of 16 and 18 years can save a total of £19,320 tax-free each year by opening a cash ISA and a kid’s version of the ISA, called a Junior ISA, in the same year.

3. I don’t have £15,240 to save. Can I use part of it now and the balance next year?

No, you can’t!

By April 5, 2016, you must either use all of your ISA allowance for 2015 (£15,240) – split between a cash ISA and stocks & shares ISA – or the unused balance will be lost forever. The next year, you’ll get a new allowance, but prior years’ unused balances do not carry forward.

Image source: Pixabay

4. Can my stocks & shares ISA also be used to hold cash?

Ideally, you should not be holding cash in a stocks and shares ISA because that defeats the purpose of having an account for investing in the stock market. However, many stocks & shares ISAs allow you to hold cash in them as a means of subsequently deploying the money to buy shares.

Click below for additional (highly important) FAQs before you open a stocks and shares account.

FAQs – Is a Stocks and Shares Account Right for Me?

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Best Stocks and Shares ISA Comparison and Ranking Table

The ranking table below presents a detailed comparison of this year’s best stocks and shares ISAs.

BANK

ACCT

 DETAILS

Santander

Investments ISA

  • You should have a minimum of £50,000 to invest over a typical time period of at least 5 years; or
  • In addition to existing investments at Santander, you should have at least £25,000 more to invest in this stocks and shares ISA, which will result in a minimum investable balance of £50,000.
  • You’ll pay a minimum advisory fee of £250.
  • There is sliding scale of service fees of up to 2.50% of the value of your portfolio.
  • You don’t have to declare ISAs on your tax return.

Santander

Fixed Term Investment

  • This is an indexed-linked, fixed-term ISA account.
  • At maturity, you will get back the principal invested as well as a minimum return.
  • You also have the potential to earn an additional return based on how the index to which these products are linked performs.
  • If you cash these products before maturity, you may end up getting back less than what you initially invested.
  • You need a minimum of £50,000 of assets invested at Santander to open one of these ISA accounts, with a minimum fee of £250 applicable.

Barclays

Investment ISA

  • You must have some understanding of how stock markets function or should be a savvy investor to open this stocks and shares ISA.
  • You don’t have to pay any fees if you only invest in funds from Barclay’s sponsored Funds Market.
  • You’ll have access to 2,000+ funds.
  • You’ll also get access to a range of tools, market data, and lots of fund analyses to help you choose funds and manage your account.
  • Be advised, however, that there is no investment advice provided with this ISA account.

Lloyds Bank

Stocks and Shares ISA

  • You may open, operate, and manage this ISA account online.
  • You should have an investment time frame of between 5 and 10 years.
  • This account offers you a choice of three managed funds sponsored by Lloyds depending on your risk tolerance.
  • You may open an account by investing an initial lump sum of a minimum of £2,000 and then topping that up with £250 regularly, by making regular £100 monthly contributions or a combination of both.
  • This stocks & shares ISA provides you the option to switch between funds anytime depending on your changing risk appetite.
  • You may elect to close your account within 30 days of opening. You’ll receive your principal back minus/plus any losses/gains made by your investments during that time.
  • You pay no initial setup charge, no topping-up fee, and no selling or switching fees.
  • There is a sliding rate applicable to service fees based on the value of your portfolio. You’ll pay anywhere between£3 and £20 on portfolios valued between £15,000 and £100,000+.
  • There is also a maximum charge of 0.45% of the portfolio value that you are charged as an ongoing charge.

Lloyds Bank

Share Dealing ISA

  • If you are an extremely savvy investor, this stocks and shares ISA account may be ideal for you.
  • Open the ISA account online.
  • Build, manage, and monitor your portfolio using Lloyds-provided online tools.
  • You’ll be able to integrate a variety of products into your portfolio, including stocks, bonds, gilts, and funds.
  • You’ll get access to UK as well as global stock markets to build diversified portfolios that offer the best ISA rates of return.
  • Share dealing charges of £15 per deal apply.
  • There is a 6-monthly administration fee of 0.25% of your portfolio value plus applicable VAT.
  • The minimum admin fee is £12.50 (+ VAT), while the maximum admin fee is £60 (+ VAT).
  • Dealings can be conducted online or via phone.
  • Be aware that there are various graduating scale-based rates that apply to deals that you may transact through this stocks & shares ISA account, including online commissions, telephone commissions, foreign currency conversion charges, and frequent-trader commissions.

Nationwide

 Stocks & Shares ISA

  • If you are a savvy stock market investor and wish to operate and manage your stocks & shares ISA account by yourself, then this account may be for you.
  • You will have online access to a broad range of funds from Legal & General (L&G).
  • Charges for these funds range from 0.77% to 1.08% of the value of your fund.
  • The minimum investment required is £20.
  • Before opening this online stocks and shares ISA account and choosing the funds that match your needs, you’ll be asked a series of questions to determine your investment objectives and risk tolerance.
  • Alternately, if you want professionals to manage the ISA account for you and have a minimum of £50,000 to invest, then a Nationwide Financial Planning Manager can assist you.
  • Compared to a self-managed ISA account, you’ll get access to a much broader selection of investments, plus you’ll have professional advice along the way.
  • You’ll pay an ongoing service charge for this premium service, which is based on the value of your portfolio.

Halifax

Self-Select Stocks and Shares ISA

  • As a “self-select” account, this stocks and shares ISA is ideal for individuals who are extremely confident in their knowledge of the stock markets.
  • You’ll be able to take advantage of online, real-time quotes and streaming shares data.
  • Depending on the type of deals that you conduct, you will pay a commission on each transaction executed.
  • Online trades made through this ISA account will cost you £12.50 per trade while regularly scheduled transactions will cost £2.00 per trade in dealing commission.
  • There is an annual administration charge of £12.50 (including VAT).
  • While the charge for transferring out is £25 per investment (for a maximum charge of £125), transfers from other ISA managers or approved sharesave schemes are free.
  • You may also close your account for free.

Halifax

Junior Stocks & Shares ISA

  • This is a great tax-free savings vehicle for parents/guardians of children who want to start saving for their children’s futures.
  • This stocks and shares ISA account is managed online.
  • You can save up to £4,080, depending on your child’s unused ISA allowance for 2015/16, and let it grow tax-free by investing in the stock market.
  • The minimum lump sum investment is £20, with monthly investments of as little as £20.
  • The funds in this ISA account track the performance of the UK Financial Times Stock Exchange (FTSE) 100 index and are managed by Scottish Widows Unit Trust Managers Limited.
  • Compared to several other funds, which invest in vehicles other than shares, this fund only invests in stocks, which makes it a riskier investment. This higher risk offers the potential for the best ISA rates of return in the long run.
  • There is no advice associated with this fund so you are responsible for conducting your own research.
  • There is an ongoing annual charge of 0.5% of fund value applicable to the fund. A service fee may also be introduced in the future.
  • The account automatically converts into an adult stocks & shares ISA when the child turns 18.

Halifax

Investment ISA

  • Halifax allows you to invest in three distinct types of managed funds through this stocks & shares ISA account.
  • You may invest in the Managed Growth Fund 2 if you are seeking a low risk investment.
  • For investors seeking medium to moderate risk opportunities, the Managed Growth Fund 4 is the way to go.
  • Finally, if you are high-risk taker looking for the best ISA rates of returns, then the Managed Growth Fund 6 may be what you are looking for.
  • Depending on each fund’s investment objective, these funds may invest in various types of assets, including fixed interest securities (bonds), equities (shares), and property.
  • You can invest a minimum lump sum of £2,000 in your ISA account and then make regular/periodic lump sum top-ups of a minimum of £200 as well as regular monthly deposits of £100.
  • These investments are ideal if you have a 5-to-10 year investment time frame. While you can withdraw your money anytime, be advised that your principal could be depleted if it isn’t allowed the benefit of long-term growth (i.e., less than 5 to 10 years).
  • There is an annual ongoing charge of 0.45% of the value of each fund.
  • You’ll also be paying a monthly service fee of between £3 and £20, depending on the value of the investments held inside this stocks and shares ISA.


Disclaimer

Information about the best stocks & shares ISAs and other financial data presented on this page are those that have been identified by AdvisoryHQ based on a detailed level of research and due diligence.

AdvisoryHQ’s proprietary stocks & shares ISA account selection methodology focuses on identifying stocks and shares ISA products that offer the best value for money to retail customers and which are open to the broadest range of consumers.

Most of these types of ISA accounts are those offered by online UK banks, building societies, and other savings/investment institutions and are available to any UK resident, usually 16 years of age or older.

While we have endeavoured to review accounts that provide the best ISA rates of returns available, the above lists of stocks & shares ISAs do not cover every ISA product imaginable. Please do not consider these lists as “comprehensive.”

Please consult each bank’s or institution’s website for information on the most updated stocks & shares ISA product offerings.

The value of investments in a stocks & shares ISA can go up, as well as down, so you could get back less money than what you originally invested.

Please consult a qualified investment adviser before making any decisions about which stocks or shares to purchase.

Fees discussed here may not be the only costs associated with a particular stocks and shares ISA. Please consult the institution’s website or your stock broker/investment advisor to learn more about fees, costs, and commissions applicable when you buy/sell stocks, shares, bonds, and other investment vehicles in a stocks & shares ISA.



AdvisoryHQ (AHQ) Disclaimer:

Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.

Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.