Over-50s still put faith in ISAs


Approaching retirement means more thought needs to be put towards funding your golden years, and for many, having the right savings account will be a key part of that process.


Money Facts reports that many will use their life savings to boost their income in later life, and according to research from Saga Investment Services, many over-50s still put their faith in ISAs.

Cash still King

It’s easy to see why ISAs remain the account of choice for many over-50s, even with ultra-low interest rates making things slightly more difficult. The accounts remain tax-free for life, regardless of how big a pot you build up, whereas with the Personal Savings Allowance, it’s only the first £1,000 in interest each year that’s tax-free. This may sound like a lot, but if you’ve got your life savings locked away in a half-decent account, that allowance may not go very far.

Many are particularly drawn to cash ISAs, too, arguably due to the convenience and security such accounts can offer. For example, a quarter of respondents questioned by Saga said they plan to open a new ISA in 2017, and while a third of those said they’ll look at a stocks & shares ISA, almost half say they’ll be opting for a cash ISA (and one in five will be looking to open both versions). As it stands, two-thirds of the over-50s surveyed already have a cash ISA, while four in 10 have a stocks & shares version, so there’s a clear preference for the safe haven of cash. Not only that, but just 2% of respondents were considering opening a stocks & shares ISA for the first time, so despite low interest rates, many appear reluctant to make the jump to investments.

“Savers have had it extremely tough over many years now, and yet many still feel uncertain about making the switch to investing,” said Sally Merritt, head of product for Saga Investment Services. “This is largely because people don’t know quite where to start and they are wary of the risk. “However, people need to make their money work harder for them -not just to give them a higher level of income, but also simply to stop their money losing value in real terms. Ultimately, holding cash which earns less interest than the rate of inflation means that people are losing spending power. And the compounded effect of this over a number of months or years could be much bigger than they realise.”

Time to take the plunge?

If you’re still pondering over cash or stocks & shares, it may be time to take the plunge with the latter – but only if you’re prepared. A stocks & shares ISA remains far riskier than its cash-based counterpart, so should only be considered if you’re comfortable with the risks and have a suitable financial buffer in cash. “If people have a good cushion of cash savings, say enough to cover six-12 months’ worth of living expenses, then it may make sense to try investing with some of their additional cash savings,” said Sally. “Investing should be a long-term plan, we suggest three-five years as a minimum, to help even out the rises and falls in the market.”

(Article source: Money Facts)

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